FIVE STOCKS THAT HAVE CATALYSTS
The following is investment research from Mark Bunting, Publisher, Capital Ideas Research on five publicly-listed Canadian companies from five different industry sectors, in which the firms may have some catalysts to drive their stock prices higher.
The research comes from Acumen Capital, an independent investment dealer based in Calgary, and member of the Canadian Investor Protection Fund. Acumen analyst Brian Pow has put together a list of five companies that he believes have special situations — be they acquisitions, debt repayment, dividend increases — that will act as catalysts for growth and higher share prices.
The companies range in market value from below $100 million to more than a $1 billion. They’re a diverse bunch operating in real estate financing, aerospace and defence electronics, rail ties and utility poles, air cargo, and food court restaurants.
Let’s get started with Acumen Capital’s five best special situations ideas:
Terra Firma Capital Corporation (TII-V). Speculative Buy, $1.05 Target Price.
Terra Firma is a real estate financing company.
“Highlights of our meeting with management are below.
- Management Track Record. Management has a strong track record of creating shareholder value.
- Insider Ownership and Buying. Insiders own 22% of TII providing a strong incentive to create shareholder value.
- Geographic Shift. The United States is about 40% of TII’s portfolio; this is expected to move towards 80%.
- Resolution of Loans in Arrears. We expect TII to record revenue in the fourth quarter of 2016 and/or first quarter of 2017 results.”
Firan Technology Group Corp (FTG-T). BUY,
Target Price $4.95.
Firan is a maker of aerospace and defense electronic products and subsystems.
“We see further price potential given the positive macro outlook for the global aerospace and defense industry.
- Acquisitions will help fuel financial performance.
- Favourable industry growth.
- Expecting further margin improvement. We are currently forecasting 26.7% gross profit margins in 2017 and 2018.
- Many reasons for the Company to outperform expectations. We see the potential for FTG to beat our estimates on better efficiencies, new contract wins, and further mergers and acquisitions.”
Stella-Jones Inc. (SJ-T). BUY,
Target Price $52.50.
Stella-Jones is a producer and marketer of pressure treated wood products.
- “Rail tie business. SJ expects to see the orders come back in the current quarter.
- Utility poles. Some of the regional weakness has improved since the third quarter of 2016 update.
- Residential lumber. We expect SJ to build its business in this space through existing and new clients in 2017.
We see a high likelihood of a dividend increase in 2017, given the strong free cash flow generation.”
Cargojet Inc. (CJT-T). BUY,
Target Price $55.
Cargojet is a provider of overnight air cargo services.
“We believe CJT is a good buying opportunity for a few reasons:
- Record peak season volumes. We expect record volumes to translate into strong fourth quarter of 2016 financial results (expected in early-March).
- Strong free cash flow generation used to pay down debt. We belief CJT will pay down debt and could potentially announce a dividend increase.
- Potential growth in market share.”
MTY Food Group Inc. (MTY-T). BUY,
Target Price $56.
MTY franchises and operates quick-service restaurants.
“We’re impressed by MTY’s growth of the business from one brand to more than 55 brands and 5,723 locations in 2016. We remain positive on the name for three reasons.
- Acquisitions should lead growth. MTY acquired Kahala Brands in July 2016 and Baja Fresh Mexican Grill in October 2016. We see these two brands providing strong growth and diversification away from the Canadian market.
- Improving Canadian outlook. We see the Canadian outlook improving through 2017.
- Potential acquisitions. We see significant room for small tuck-in acquisitions in 2017.
- Dividend increase given low payout ratio. We continue to expect MTY to increase its dividend in early-2017 based on annual dividend increases for the last five years.”
MTY was a Capital Ideas Research cover story on May 30, 2016. The stock rose as much as 18%.
To subscribe to Capital Ideas Research for just $9.99 a month, please click here. Your first month is free! capitalideasresearch.com or call our subscription manager at 1(800) 732-9822, ext 100. Or reach us at: [email protected]
If you have any further questions, please feel free to contact us directly: [email protected]