One Bay Street analyst has slapped an effective "sell" on Sprott Inc., while others cut their target prices Monday as the investment firm faces headwinds from poor fund returns, redemptions and lower performance fees.
"Many of Sprott's flagship funds are down 10 per cent or more year-to-date," said CIBC World Markets analyst Paul Holden. "These same funds are about 50 per cent below high water marks, and are unlikely to produce meaningful performance fees during our 2013-2014 forecast horizon."
Bullion funds remain the engine of growth and atttracted $574-million in new money in the fourth quarter, Mr. Holden wrote. "Hedge funds continue to be in net redemptions, losing $123-million in the quarter. Mutual funds were hit with net redemptions of $37-million. Given returns, we expect redemptions will continue."
Mr. Holden downgraded his rating on Sprott to "sector underperform," and cut his one-year target by 50 cents to $3.25 a share. The average Street target is $3.86 a share, according to Bloomberg data.
Canaccord Genuity analyst Scott Chan, who maintains a "hold" rating, reduced his 12-month target to $3.75 a share from $4. "While Sprott is making strides in diversifying its assets under management, the company continues to be levered towards resource investments (specifically precious metals), which affects its highly sensitive fee business," he said.
TD Securities analyst Doug Young cut his one-year target to $4 a share from $4.50. "Assets under management declined quarter over quarter as the performance of a majority of the company's funds was negative, resulting in market value appreciation," said the analyst who maintains his "hold" rating on Sprott.
5N Plus Inc. (VNP-TSX)
Byron Capital Markets analyst Jonathan Lee downgraded the producer of specialty metals to a "sell" rating after a tough fourth quarter. Revenue was higher than expected in the face of lower commodity prices, but what was "troubling" was the fact that company was continuing to write down its inventory, he added.
Target: He cut his one-year target to $1.60 a share from $2.30. The average Street target is $2.75 a share.
Ithaca Energy Inc. (IAE-TSX)
In building a North Sea oil and gas company, the acquisition of Valiant Petroleum PLC for $309-million provides near-term cash flow until production begins from the Greater Stella area, said CIBC World Markets analyst Ian Macqueen. "Our net asset value increases from $2.87 a share to $3.21 a share."
Target: He raised his one-year target by 50 cents to $3.25 a share. The average Street target is $3.05 a share.
Glacier Media Inc. (GVC-TSX)
Canada Revenue Agency's decision to issue a reassessment of its non-capital losses from 2008 to 2011 for the media company "enhances the risk inherent to this name to some degree," said TD Securities analyst Michael Elkins.
Target: He downgraded his rating to a "hold," and cut his 12-month target by 25 cents to $2.25 a share. The average Street target is $2.15 a share.
Rackspace Hosting Inc. (RAX-NYSE)
Canaccord Genuity analyst Greg Miller slashed his target on the provider of hosting and cloud computing services because of growing competition. Rackspace's top-line growth will be pressured by price reductions for cloud computer services from players like Amazon.com, he noted.
Target: He cut his one-year target by $5 (U.S) to $55 a share. The average Street target is $64.54 a share.