Canadian Equity Research Opportunities in Tax-Loss … · Canaccord Genuity is the global capital...

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)

The recommendations and opinions expressed in this research report accurately reflect the research analyst’s personal, independent and objective

views about any and all the companies and securities that are the subject of this report discussed herein.

Canadian Equity Research


20 November 2017

Potential tax-loss selling opportunities

for stocks that are expected to recover:

Energy

Cenovus Energy CVE-TSX 7

Birchcliff Energy BIR-TSX 8

Gear Energy GXE-TSX 8

Crew Energy CR-TSX 8

Secure Energy Services SES-TSX 9

Gran Tierra Energy GTE-TSX 9

Financials

Dealnet Capital Corp. DLS-TSXV 12

Healthcare

ProMetic Life Sciences Inc. PLI-TSX 13

Industrials

Newalta Corporation NAL-TSX 14

Tree Island Steel Ltd. TSL-TSX 15

Metals & Mining

Coeur Mining Inc. CDE-NYSE 16

Fortuna Silver Mines Inc. FVI-TSX 18

Klondex Mines Ltd. KDX-TSX 19

Tahoe Resources Inc. THO-TSX 20

Torex Gold Resources TXG-TSX 21

Pipelines

Enbridge Inc. ENB-TSX 22

Technology

Celestica Inc. CLS-NYSE 25

UrtheCast Corporation UR-TSX 27

Potential tax-loss selling opportunities

where we recommend a switch:

Consumer

Hudson's Bay Company HBC-TSX 4

(switch into Canadian Tire -

CTC.A-TSX)

Financials

Alaris Royalty Corp. AD-TSX 11

(switch into ONEX Corp. –

ONEX-TSX)

Metals & Mining

Eldorado Gold Corp. ELD-TSX 17

(switch into Kinross –

K-TSX)

Canaccord Genuity Research | Canaccord Genuity | [email protected]

Doug Taylor, CFA | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.867.6101

Opportunities in Tax-Loss Selling Season While broad indices remain near recent highs, there have been pockets of weakness

which may see pressure from tax-loss selling. The S&P/TSX composite index is, as of

November 15, up 3.9% YTD. The strong overall performance this year was broad-based,

with particularly strong performance in consumer discretionary, industrials, telecom and

IT. Energy was the only sector to decline overall YTD. We believe the broad-based, strong

performance could mean more acute pressure from tax-loss selling on stocks that have

not fared as well.

Historically, this trade has proven broadly effective - last year was an exception. While

taxes are not a consideration for all investors, the impact of tax-motivated fund flows

should interest everyone. Over the last six years, stocks down >15% YTD through

November 15 have underperformed the index by an average of 4% through December

15, before liquidity dries up for the holidays. In the subsequent month, these same

stocks have outperformed by 2%. Last year did not conform to these trends; we attribute

that partially to an exceptionally small number of stocks that declined by more than 15%

through November 15.

Figure 1: Historical Tax-Loss Selling Pressure and Subsequent Rebound Analysis

Equities Down >15% YTD TSX Composite Under/Outperformance of SampleS&P/TSX # of Equities Perf. Perf. Perf. Perf. Rel Perf. % Sample Rel Perf. % Sample

Price Return Down >15% Nov-15 Dec-15 Nov-15 Dec-15 Nov-15 Underperf. Dec-15 Outperf.Year YTD Nov-15* YTD Nov-15 to Dec-15 to Jan-15 to Dec-15 to Jan-15 to Dec-15 Index to Jan-15 Index

2017 3.9% 562016 13.4% 23 7.9% 0.2% 3.1% 1.8% 4.7% 43.5% (1.6%) 39.1%2015 (10.6%) 107 (9.3%) (9.8%) (1.2%) (6.5%) (8.1%) 76.6% (3.3%) 44.9%2014 9.0% 45 (22.7%) 5.8% (7.7%) 2.5% (15.1%) 77.8% 3.4% 46.7%2013 8.4% 47 (5.3%) 10.7% (2.6%) 4.9% (2.7%) 72.3% 5.8% 70.2%2012 (1.2%) 64 5.0% 3.5% 4.1% 2.8% 0.9% 50.0% 0.7% 57.8%2011 (9.0%) 86 (10.5%) 11.4% (5.9%) 6.3% (4.6%) 65.1% 5.1% 64.0%

Average (4.1%) 64.2% 1.7% 53.8%

Source: Factset Research Systems, Canaccord Genuity

Our 2016 picks outperformed - we once again highlight names where we see an

opportunity. This year, as in previous years, our analysts have selected specific stocks

(S&P composite or not) and provided ideas on how best to take advantage of any tax-

motivated movements, whether by buying on weakness or switching into other names (as

shown in the sidebar on the left).

We reviewed our picks from last year to gauge the performance achieved by our

selections (Figure 3). On average, our highlighted names underperformed the S&P/TSX

Composite by >10% during the November 15 – December 15 timeframe and names

which we recommended buying outperformed the index by 6% on average over the

subsequent two months.

Technical Commentary

We have provided a Technical overlay to the four stocks in this report with the largest

market capitalizations (HBC, CVE, ENB and CLS). We incorporate momentum, relative

strength, price, and volume in order to build a comprehensive technical picture..

For important information, please see the Important Disclosures beginning on page 28 of this document.

Figure 2: S&P/TSX Composite Constituents Down >15% YTD

Close Price Close Price YTD Return

Name Symbol 31-Dec-16 15-Nov-17 15-Nov-17

ELDORADO GOLD CORP ELD-CA 4.32 1.47 (66.0%)

TAHOE RESOURCES INC THO-CA 12.65 5.61 (55.7%)

HOME CAPITAL GROUP INC -CL B HCG-CA 31.34 14.85 (52.6%)

KLONDEX MINES LTD KDX-CA 6.25 2.97 (52.5%)

PRECISION DRILLING CORP PD-CA 7.32 3.51 (52.0%)

PEYTO EXPLORATION & DEVELPMT PEY-CA 33.21 16.91 (49.1%)

CRESCENT POINT ENERGY CORP CPG-CA 18.25 9.63 (47.2%)

BONAVISTA ENERGY CORP BNP-CA 4.81 2.54 (47.2%)

CREW ENERGY INC CR-CA 7.51 3.98 (47.0%)

BIRCHCLIFF ENERGY LTD BIR-CA 9.37 5.03 (46.3%)

DHX MEDIA LTD DHX.B-CA 7.05 3.84 (45.5%)

BAYTEX ENERGY CORP BTE-CA 6.56 3.75 (42.8%)

SEVEN GENERATIONS ENERGY LTD VII-CA 31.31 18.25 (41.7%)

PROMETIC LIFE SCIENCES INC PLI-CA 2.23 1.33 (40.4%)

MEG ENERGY CORP MEG-CA 9.23 5.52 (40.2%)

CENOVUS ENERGY INC CVE-CA 20.30 12.99 (36.0%)

SPARTAN ENERGY CORP SPE-CA 9.99 6.48 (35.1%)

ENSIGN ENERGY SERVICES INC ESI-CA 9.38 6.14 (34.5%)

GRAN TIERRA ENERGY INC GTE-CA 4.06 2.68 (34.0%)

TOREX GOLD RESOURCES INC TXG-CA 20.79 13.76 (33.8%)

SECURE ENERGY SERVICES INC SES-CA 11.71 7.95 (32.1%)

ARC RESOURCES LTD ARX-CA 23.11 15.91 (31.2%)

TOURMALINE OIL CORP TOU-CA 35.91 24.74 (31.1%)

FORTUNA SILVER MINES INC FVI-CA 7.59 5.25 (30.8%)

RITCHIE BROS AUCTIONEERS INC RBA-CA 45.55 31.71 (30.4%)

SHAWCOR LTD SCL-CA 35.84 25.38 (29.2%)

CINEPLEX INC CGX-CA 51.22 36.64 (28.5%)

NEVSUN RESOURCES LTD NSU-CA 4.15 2.99 (28.0%)

GUYANA GOLDFIELDS INC GUY-CA 6.12 4.41 (27.9%)

KNIGHT THERAPEUTICS INC GUD-CA 10.74 7.75 (27.8%)

SEMAFO INC SMF-CA 4.42 3.22 (27.1%)

DETOUR GOLD CORP DGC-CA 18.29 13.37 (26.9%)

ADVANTAGE OIL & GAS LTD AAV-CA 9.12 6.67 (26.9%)

WHITECAP RESOURCES INC WCP-CA 12.16 8.98 (26.2%)

RAGING RIVER EXPLORATION INC RRX-CA 10.56 7.87 (25.5%)

ALARIS ROYALTY CORP AD-CA 23.95 18.25 (23.8%)

ELEMENT FLEET MANAGEMENT CP EFN-CA 12.46 9.52 (23.6%)

DOREL INDUSTRIES INC DII.B-CA 38.80 30.13 (22.3%)

EXCHANGE INCOME CORP EIF-CA 41.75 32.49 (22.2%)

MULLEN GROUP LTD MTL-CA 19.83 15.44 (22.1%)

ENBRIDGE INC ENB-CA 56.50 44.06 (22.0%)

JUST ENERGY GROUP INC JE-CA 7.34 5.75 (21.7%)

TORC OIL & GAS LTD TOG-CA 8.27 6.49 (21.5%)

BOARDWALK REAL ESTATE TRUST BEI.UT-CA 48.65 38.70 (20.5%)

INTERTAPE POLYMER GROUP INC ITP-CA 25.18 20.15 (20.0%)

CAMECO CORP CCO-CA 14.04 11.30 (19.5%)

VERMILION ENERGY INC VET-CA 56.49 45.64 (19.2%)

UNI-SELECT INC UNS-CA 29.49 23.91 (18.9%)

CES ENERGY SOLUTIONS CORP CEU-CA 7.66 6.23 (18.7%)

FIRST MAJESTIC SILVER CORP FR-CA 10.26 8.37 (18.4%)

LUCARA DIAMOND CORP LUC-CA 3.04 2.49 (18.1%)

BARRICK GOLD CORP ABX-CA 21.49 17.82 (17.1%)

NOVAGOLD RESOURCES LTD NG-CA 6.14 5.10 (16.9%)

ENBRIDGE INCOME FUND HLDGS ENF-CA 34.77 29.34 (15.6%)

CELESTICA INC CLS-CA 15.91 13.45 (15.5%)

IMPERIAL OIL LTD IMO-CA 46.71 39.71 (15.0%)

Source: Factset Research Systems


20 November 2017 2

A Post-Mortem on Our Previous Selections

In an effort to provide accountability, we took a look at how our picks fared last year.

In Figure 3 we analyze the performance of the fundamental calls we made during the

November 15 to December 15 timeframe and the subsequent months.

On average, the names last year which we recommended buying into tax-loss selling

season rebounded 8.1% between December 15 and January 15, an outperformance

of 6.2% vs. the TSX Composite Index in a single month, after underperforming by 8.1%

leading into December 15.

Of the names where we recommended outright selling at the outset of tax-loss selling

season, our selections declined by an average of 15.6% between November 15 and

December 15.

Figure 3: Review of 2016 Selections

Nov-15 - Dec-15 Dec-15 - Jan-15 Nov-15 - Dec-15 Dec-15 - Jan-15

Recommendation: Buy Into Tax-Loss Selling Season

Premier Gold Mines Limited PG-CA (18.0%) 45.5% (21.2%) 43.7%

Eldorado Gold Corporation ELD-CA (5.7%) 23.4% (8.8%) 21.6%

Merus Labs International Inc. MSL-CA (21.3%) 14.0% (24.4%) 12.2%

ProMetic Life Sciences Inc. PLI-CA (28.4%) 10.2% (31.5%) 8.3%

DHX Media Ltd. DHX.B-CA (4.4%) 4.0% (7.6%) 2.2%

Just Energy Group Inc. JE-CA 3.0% 1.3% (0.1%) (0.6%)

Primero Mining Corp. P-CA (0.9%) (0.5%) (4.1%) (2.3%)

CI Financial Corp. CIX-CA 15.0% (3.4%) 11.9% (5.2%)

UrtheCast Corp. UR-CA 25.0% (5.6%) 21.9% (7.4%)

NYX Gaming Group Limited NYX-CA (14.1%) (8.2%) (17.2%) (10.0%)

Average (5.0%) 8.1% (8.1%) 6.2%

Recommendation: Sell Into Tax-Loss Selling Season

Gluskin Sheff + Associates Inc. GS-CA 15.5% 8.2% 12.4% 6.4%

Hudson's Bay Co. HBC-CA (9.2%) (29.8%) (12.3%) (31.7%)

Valeant Pharmaceuticals International Inc VRX-US (25.4%) 12.7% (28.5%) 10.9%

Concordia International Corp. CXRX-US (31.0%) 0.5% (34.1%) (1.4%)

Average (12.5%) (2.1%) (15.6%) (3.9%)

Price Return (%) Relative Performance vs. TSX Comp.

2016 Funamental Stock Selections

Source: Factset Research Systems; Canaccord Genuity


20 November 2017 3

https://canaccordgenuity.bluematrix.com/sellside/EmailDocViewer?encrypt=d4699c0e-74db-4f7c-9a44-4e48947bf607&mime=pdf&co=Canaccordgenuity&[email protected]&source=mail

Hudson's Bay Company

Merchandising

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and allthe companies and securities that are the subject of this report discussed herein.


HOLDPRICE TARGET C$12.00Price (15-Nov)Ticker

C$12.20HBC-TSX

52-Week Range (C$): 8.08 - 17.33Market Cap (C$M): 2,220Shares Out. (M) : 186.0Dividend /Shr (C$): 0.05Dividend Yield (%) : 0.4Shares Out., Basic (M) : 182.0Implied Return to Target (%) : (1.2)Net Debt (Cash) (C$M): 3,094Enterprise Value (C$M): 5,314Net Debt/EBITDA : 6.26

FYE Jan 2015A 2016A 2017E 2018ERevenue (C$M) 11,162 14,455 14,251 14,837EBITDA (C$M) 781.0 636.0 438.0 514.4EV/EBITDA (x) 6.8 8.4 12.1 10.3P/E (x) 41.7 (4.3) (5.3) (7.0)

20

18

16

14

12

10

8

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May

-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

HBCS&P/TSX�Capped�/�Consumer�Discretionary�(rebased)

Source:�FactSet

Priced as of close of business 15 November 2017

Derek Dley, CFA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 416.869.7270Ben Pereira | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 416.687.6339

Share performanceDown 14.71% YTD; down 60.76% from 3-year highInvestment thesis recap• The company continues to face heavy competition from rival department stores, while

the retail industry experiences secular growth at an increasing rate from e-commerceshopping, leaving HBC to play catch-up.

• While we continue to believe there remains value in the company's real estate assets,we believe it will be difficult to accretively monetize assets which display higherproductivity, given the company’s continued focus on growing its retail operations.

• Our C$12.00 target price represents our sum-of-the-parts valuation which equals$12.31 per share. Our sum-of-the-parts valuation incorporates the L&T flagshipdivestiture, preferred equity investment, and WeWork’s leasing of DSG retail space(which reduced our 2018 adjusted EBITDA estimate by less than 1%).

• While the company's European operations and real estate assets have been thesubject of additional speculation regarding monetization, subsequent to the L&Tflagship divestiture, we remain cautious on the matter given our view that HBC'sstatements regarding a potential transaction appeared relatively cautious. However,our calculations suggest a transaction could add $2.10 to our sum-of-the-parts valueof $12.31.

Upcoming potential catalystAlthough we remain relatively cautious on HBC's potential monetization of additionalreal estate assets in the near term, there remains the possibility of incremental newsregarding further asset divestitures, impacting the share price.Near-term trade opportunity: Switch into Canadian Tire CorpWe believe HBC could experience further pressure through year-end from tax-motivatedselling. Within the consumer discretionary sector, we continue to prefer Canadian TireCorp (CTC.A-TSX: $161.21 | BUY; C$186 target price), for three main reasons:1. Canadian Tire has demonstrated greater defensiveness to the rising trend of e-

commerce than brick and mortar apparel retail peers. In the last eight quarters, CTC'sbanners have experienced an average of 3.2% YoY growth, while HBC's banners haveexperienced an average of -1.1% YoY growth.

2. Canadian Tire's credit card business, CTFS, provides elements of stability anddiversification, in our view. Currently, CTFS represents ~18% of the company's sum-of-the-parts valuation.

3. Canadian Tire's successful monetization of real estate assets into CT REIT (CRT.UN-TSX: $14.45 | HOLD; C$14.50 target price), allows for a clear and accurate valuation,effectively reducing speculation and volatility, in our opinion.

20 November 2017 4

2

Technical Overview – HBC

The chart of Hudson’s Bay (HBC) is the one that suggests the highest probability of

further near-term weakness, with a test of important support near 9.65 likely.

Figure 1: Weekly Chart – HBC

Source: Stockcharts.com, Canaccord Genuity Research

Top Panel: MACD – The stock just triggered a new weekly “mechanical sell” signal,

a technical negative (see red circle).

Second Panel: SCTR – Relative strength versus the TSX Composite is showing

early signs of stalling (see red circle).

Third Panel: Price – The close below 11.56 sees next important support near

9.65. Major support is near 8.77.

Bottom Panel: Volume and On-Balance-Volume – Volume has started to show

signs of selling pressure (see red circle), an early technical negative.


20 November 2017 5

Oil and Gas, Exploration and Production


Canaccord Genuity Corp. (Canada)Anthony Petrucci | Analyst - [email protected]

John Bereznicki, CFA | Analyst [email protected]

Dennis Fong, P.Eng. | Analyst [email protected]

Jenny Xenos, MBA, CFA | Analyst [email protected]

Sam Roach, CFA | Analyst - [email protected]

With Canadian oil and gas stocks under significant pressure through 2017, there is thepotential for tax loss selling in several of our stocks, and we believe this could createthe potential for bargain hunting in select names. With the recent rally in spot prices forcrude oil and Canadian natural gas, we believe the disconnect between share prices andearnings potential may diverge further through the tax loss selling season.While the S&P TSX Capped Energy Index shows as down only 13% YTD, the medianfall of stocks within our coverage universe (which is biased towards smaller marketcaps), fell more than 20%. Unsurprisingly, the integrated O&G subsector performed best,declining just 6% on average, while the Jr/Int E&P and OFS subsectors took a larger hit(down ~20% on average).We have identified a list of stocks to consider buying on tax-loss selling weakness (Figure1), with our highest-conviction ideas as follows:• Cenovus Energy (CVE-TSX | BUY | C$17.00 PT). CVE's share price was under

pressure earlier this year on shareholder reaction to the acquisition fromConocoPhillips. We believe the company's four asset sales to date at metrics aboveexpectations, and increased market confidence in the company's CEO, could providea string of positive catalysts into next year. We view any tax-loss related selling as anopportunity to gain exposure to a company with strengthening operational momentumand top-decile assets.

• Birchcliff Energy (BIR-TSX | BUY | C$9.00 PT). BIR’s share price was under pressureearlier this year on the back of selling from a major shareholder and its gas exposure.We view any tax-loss related selling as an opportunity to gain exposure to a companywith ~$0.70/Mcf gas opex, a clean balance sheet, a significant inventory of ~1,490drilling locations with strong returns and an unwarranted ~1.5x EV/DACF discount tothe group.

• Gear Energy (GXE-TSX | Speculative BUY | C$1.25 PT). We believe the stock issignificantly undervalued in the context of ~$55/bbl oil. We estimate GXE trades ata circa 20% discount to the peer group, which does not reflect the company's strongexecution and 20%+ growth potential next year, in our view.

• Crew Energy (CR-TSX | BUY | C$7.00 PT). CR’s share price has been under pressuredue to commodity prices in general, provincial-specific concerns in B.C., and someinfrastructure downtime. We view the company as one of the most attractive ways togain exposure to the development of the Montney, and believe it is currently tradingbelow simple land value based upon recent asset sales and land sale activity.

• Secure Energy Services (SES-TSX | BUY | C$11.50 PT). Despite posting strongQ3/17 operating results and increasing its dividend by 6%, Secure shares are down31% YTD, with the stock trading at 8.5x consensus 2018E EV/EBITDA versus a historicrange of 8.0x to 14.0x forward EV/EBITDA. We believe Secure has a diverse portfolioof organic growth opportunities, and would view any tax-related selling pressure as anattractive entry point for longer-term investors.

• Gran Tierra Energy (GTE-TSX | BUY | C$4.20 PT). We like GTE's growth potential(+18% in 2017; +22% in 2018), NAV upside (3-5x in next five years) and potentialexploration catalysts (eight wells). We would view near-term pressure on the shares asa buying opportunity.

20 November 2017 6

2

Figure 1: Oil and gas stocks to buy on weakness

Source: FactSet, Company Reports, Canaccord Genuity estimates

Our highest conviction ideas are as follows:

Cenovus Energy (CVE-TSX | BUY | C$17.00 PT)

Share Performance: Down 36% YTD; down 54% from 3-year high

Investment Thesis Recap

Notwithstanding our increased confidence in the company’s new leadership and the

success of its asset divestiture program, we continue to believe the 208 million share

overhang could weigh on the share price. Given the company’s continued focus on

cleaning up its balance sheet and on shareholder returns, and in light of the valuation

gap between Cenovus and its peers, we believe that over a 12–18-month timeframe

investors will be rewarded even in a modestly recovering oil price environment.

Upcoming Potential Catalyst

New CEO Alex Pourbaix recently provided his initial plans for the company, which we

believe has instilled some incremental confidence in shareholders and could provide

a near-term catalyst. Cenovus has also listed ~16,500 Boe/d of incremental asset

sales, has planned on an accelerated deleveraging, and has outlined a focus on

execution, shareholder returns and improved cost structure. We believe the execution

of this strategy will positively drive the company’s share price.

Near-term Trade Opportunity

We continue to view CVE favourably on a fundamental basis. We would view any near-

term tax-related selling pressure on the shares as a buying opportunity.

Company Ticker Share price

YTD share price

return YTD index return

Return to

target

Seniors & Integrateds

Cenovus Energy CVE $12.99 (36%) (6%) 31%

Junior & Intermediate E&P

Athabasca ATH $1.17 (43%) (16%) 92%

Baytex BTE $3.75 (43%) (16%) 13%

Birchcliff BIR $5.03 (46%) (16%) 79%

BlackPearl Rersources PXX $1.05 (36%) (16%) 42%

Bonterra BNE $14.77 (49%) (16%) 57%

Cardinal Energy CJ $4.69 (56%) (16%) 26%

Crew Energy CR $3.98 (47%) (16%) 75%

Gear Energy GXE $0.82 (31%) (16%) 49%

Painted Pony PONY $3.19 (65%) (16%) 99%

Pine Cliff PNE $0.60 (47%) (16%) 80%

Surge Energy SGY $2.01 (39%) (16%) 63%

Vermilion VET $45.64 (19%) (16%) 14%

Oilfield Services

CES Energy Solutions CEU $6.23 (19%) (25%) 36%

Secure Energy Services SES $7.95 (32%) (25%) 41%

International E&P

Gran Tierra Energy GTE $2.68 (34%) (16%) 157%


20 November 2017 7

3

Birchcliff Energy (BIR-TSX | BUY | C$9.00 PT)



Birchcliff continues to be one of our top gas-weighted ideas in 2017. The company

completed a transition towards a low opex gas producer with ownership of its own

infrastructure, a clean balance sheet (2018E D/CF of 1.7x) and our estimated

inventory of ~1,490 risked drilling locations with strong returns. With the recent exit of

a major shareholder, we believe the stock is trading at an unwarranted ~1.5x discount

to its peer group.


A continuation of rising oil prices and relative strength in Western Canadian natural

gas would provide the key upcoming potential catalyst for Birchcliff. We view the

continued execution of its development plan as well as the company’s ability to hedge

out production and diversify its marketing strategy for natural gas as potential

catalysts.


We continue to view BIR favourably on a fundamental basis. We would view any near-

term tax-related selling pressure on the shares as a buying opportunity.

Crew Energy (CR-TSX | BUY | C$7.00 PT)



With pressure on the E&P space in general, provincial-specific concerns in B.C., and

some infrastructure downtime, CR's share price has come under considerable

pressure in 2017. We believe this has created a compelling investment opportunity,

and view the company as one of the most attractive ways to gain exposure to the

development of the Montney. With +400 largely contiguous sections set amidst active

Montney drilling, we believe CR is currently trading below simple land value based

upon recent asset sales and land sale activity.


In our view, the company appears well on pace to meeting its exit rate guidance of

+31,000 boe/d, as the doubling of the West Septimus plant (to 120mmcf/d) is poised

for Q4 of this year.

Earlier this year, CR disposed of non-core assets with no associated production in the

Goose area $49M ($1.7M per section). Additional dispositions could fund and/or

accelerate the company’s Montney development.


We continue to view CR favourably on a fundamental basis. We would view near-term

pressure on the shares as a buying opportunity.

Gear Energy (GXE-TSX | Speculative BUY | C$1.25 PT)



Gear’s execution has been very strong in 2017. In 2018, We believe Gear is poised to

generate ~20% production growth again next year within cash flow and keeping debt

below 1.0x cash flow. With the most recent crude oil rally, we estimate the stock is


20 November 2017 8

4

trading below 4.0x 2018 EV/DACF, which is a ~20% discount to the peer group and a

~10% discount to GXE’s historical average multiple.


A continuation of rising oil prices and a commensurate increase in sell-side forecasts

should be a tailwind for GXE. We expect the 2018 budget announcement in

December or January should highlight the company’s growth trajectory in a $55/bbl

oil price environment.


We continue to view GXE favourably on a fundamental basis. We would view near-term

pressure on the shares as a buying opportunity.

Secure Energy Services (SES-TSX | BUY | C$11.50 PT)

Share Performance: Down 32% YTD, down 60% from 3-year high


Secure recently reported strong Q3/17 operating results that reflected a 28% y/y

increase in processing volumes and 36% increase in disposal volumes within its core

PRD segment (“OnSite drives Q3 beat, dividend increased 6%”). The company also

increased its dividend by 6% and established a preliminary 2018 growth capital

program of $100 million. Despite these results (and a material improvement in

commodity prices), Secure currently trades at ~8.5x consensus 2018E EBITDA, versus

a historic range of 8.0x to 14.0x forward EV/EBITDA. We believe Secure has a diverse

portfolio of organic growth opportunities ahead of it, including continued market share

gains in its core PRD operation, a meaningful increase in the company’s crude-by-rail

volumes in 2018 and the build-out of the company’s specialty chemicals business.


We do not expect any material announcements through year-end 2017. That said,

Secure continues to evaluate M&A opportunities and any such transactions would be

incremental to our existing estimates.


We continue to favour Secure given its strong portfolio of organic growth opportunities

and attractive valuation. We would view any tax-related selling pressure as an

attractive entry point for longer-term investors.

Gran Tierra Energy (GTE-TSX | BUY | C$4.20 PT)

Share Performance: Down 34% YTD, down 54% from 3-year high


We like Gran Tierra for its:

Solid production growth profile (+22% in 2017, +18% in 2018);

Sustainable business model (spending funded by cash flow);

Significant NAV/sh growth potential (3-5x target within five years); and

A number of potential near-term catalysts (incl. up to eight exploration wells).

GTE has an attractive valuation, trading at 3.5x 2018E EV/DACF, compared to

International peers at 4.2x and Canadian peers at 7.8x. Furthermore, it has high

torque to oil prices, with cash flow changing by ~31% for every $10/bbl price move in

Brent.


20 November 2017 9

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5

Upcoming Potential Catalysts

The company is planning to drill up to eight exploration wells between now and the

end of Q1/18. We expect results of these wells, which are largely targeting "A"

Limestone potential, to serve as potential catalysts for the stock in the near term.


We continue to view Gran Tierra favourably on a fundamental basis. We would view

near-term pressure on the shares as a buying opportunity.

Technical Overview – CVE

Cenovus (CVE) has started a new intermediate-term uptrend and is the strongest chart

of the four that we feature.

Figure 2: Weekly Chart – CVE


Top Panel: MACD – The stock triggered a new weekly “mechanical buy” signal in

August, a technical positive.

Second Panel: SCTR – Relative strength has showing strong improvement over the

last 3 months (see blue arrow); however, a near-term pullback is underway (see

red circles).

Third Panel: Price – A new intermediate-term uptrend is in place, and the stock is

above the 40-week moving average, all technical positives. First support is near

12.53. Major support is near 10.52.

Bottom Panel: Volume and On-Balance-Volume – Volume and On-Balance-Volume

show strong signs of accumulation, a technical positive (see blue circles).


20 November 2017 10

Alaris Royalty Corp.

Specialist Lenders




C$18.25AD-TSX

52-Week Range (C$): 18.11 - 24.39Market Cap (C$M): 689Shares Out. (M) : 36.8Dividend /Shr (C$): 1.62Dividend Yield (%) : 8.9Float Cap (C$M): 627.3Total Return to Target (%) : 18.0

FYE Dec 2015A 2016A 2017E 2018ERevenue (C$M) 78 100 117 97P/E (x) 12.0 11.8 12.2 11.1EBITDA Adj (C$M) 69.4 87.2 78.3 85.1

EV/EBITDA (x) Adj 10.6 8.7 9.7 8.9

EPS Dil (C$) 1.56 1.59 1.53 1.69

25

24

23

22

21

20

19

18

17

Dec

-16

Jan-1

7

Feb-1

7

Mar

-17

Apr-17

May

-17

Jun-1

7

Jul-17

Aug-1

7

Sep-1

7

Oct

-17

Nov-

17

ADS&P/TSX�Composite�Index�(rebased)

Source:�FactSet


Scott Chan, MBA, CFA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.3549Cheng Lu | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7348

Share PerformanceDown 24% YTD (vs. S&P/TSX Composite returning ~4%) and down >50% from 3-yearhigh of $36.70We believe the following factors have driven the underperformance this year: (1)uncertainties surrounding distributions from some partners (e.g. SMi, Kimco, SCR,Agility); (2) lower net investments due to significant repurchases (i.e. Sequel, which wasthe largest investment in the portfolio at the time); and (3) markdowns on investmentswith the latest one being SMi ($41M) in Q3/17.Investment Thesis RecapWe believe the main concern from investors relates to resumption of growth (i.e., highernet investments). YTD, we estimate AD’s net investment to be ~$40M, relatively in linewith last year and significantly below 2015 net investments of $130M. As well, AD’selevated payout ratio of >90% is another overhang for the stock. For 2018, we believe ADcan achieve a payout ratio of ~90% through: (1) positive resets on existing investments;and (2) potential new investments. Further upside to the payout ratio could come fromimproving distribution payout at SCR and resumption of distributions at Kimco.Near-term Trade Opportunity: Switch into Onex CorpIn our view, Alaris could see further pressure through year-end from tax-motivated selling.While we currently have a HOLD rating on the stock, we could get more positive if thecompany can demonstrate a better growth trajectory and lower its payout ratio to below90%. As we are entering 2018, we believe key items to watch for include: (1) investmentpipeline and capital deployment visibility; and (2) positive updates and resumption ofdistributions from partners (e.g. Kimco, SCR).In the interim, we recommend investors switch out of AD into Onex Corp. (ONEX-TSX:C$91.13 | BUY). Both companies trade at a slight premium to NAV, but we believe ONEXis more justified due to; (1) growing asset management platform; (2) larger and morediversified holdings; (3) excess cash to deploy into new investments; and (4) strongerhistorical IRR returns of 28%.

20 November 2017 11

Dealnet Capital Corp.

Specialist Lenders



BUYPRICE TARGET C$0.40Price (15-Nov)Ticker

C$0.12DLS-TSXV

52-Week Range (C$): 0.11 - 0.60Avg Daily Vol (000s) : 364.5Market Cap (C$M): 34.5Shares Out. (M) : 300.2Total Return to Target (%) : 175.9Net Debt (Cash) (C$M): 162Enterprise Value (C$M): 197

FYE Dec 2016A 2017E 2018E 2019ESales (C$M) 35.4 44.0 69.7 95.1Loans (M) (C$M) 137.5 249.7 403.2 564.4Net Income Adj (C$M) (8.9) (10.9) 4.3 19.3

EPS Adj&Dil (C$) (0.04) (0.04) 0.02 0.07

Book Value /Shr (C$) 0.2 0.2 0.2 0.3

P/E (x) Adj NM NM 7.5 1.7P/Book (x) 0.6 0.6 0.5 0.4

0.7

0.6

0.5

0.4

0.3

0.2

0.1

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

DLSS&P/TSX�Composite�Index�(rebased)

Source:�FactSet


Taylor Arnold | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.687.6359

Share Performance: Down 80% YTD; down 89% from 3-year highInvestment Thesis Recap: Dealnet is a consumer-lending company that focuses onthe HVAC and home improvement markets. The company has developed a large dealer-distributor network using its internal sales channels and OEM partnerships that serveas a pipeline for originations from prime credit-rated end customers. While a pause inorigination growth during Q2/17 and a recent change at CEO have pressured the stockover the past few months, we see value in the company's dealer network and expect thatit can fuel growth in a large fragmented market.Upcoming Potential Catalysts: Dealnet highlighted that it processed more than $21million in new financing applications throughout Q2/17 and that it expects to reportsequential organic origination growth in Q3/17 which will be reported on November 30before market. In our view, the quarterly results could be positive for the stock and mayprovide some support after a few months of pressure; however, we expect that a materialrebound in the share price will require a few quarters of evidence that origination growthis back on track.On October 27, Dealnet announced that it has commenced a search for a new CEO andthat director Brent Houlden will serve as interim CEO in the meantime. Any clarity aroundthe company's leadership direction could be a catalyst for the stock but the change issomewhat recent so updates may be limited throughout the remainder of 2017.Near-term Trade Opportunity: We continue to like Dealnet over the longer term, whilenoting evidence that finance receivables are beginning to re-accelerate is necessaryto support our outlook. We would view further near-term pressure from tax-motivatedselling as a buying opportunity. While slowing organic originations are a concern, webelieve that the company has the dealer network in place to re-accelerate growth. Theconsumer finance platform is the central focus of the company's longer-term direction;therefore, it could eventually sell its engagement services business which is becoming anon-core component of operations. This could provide Dealnet with more capital to growits receivables portfolio which would be a positive catalyst for the stock, in our view.

20 November 2017 12

ProMetic Life Sciences Inc.

Pharmaceuticals




C$1.33PLI-TSX

52-Week Range (C$): 1.12 - 2.92Avg Daily Vol (000s) : 776.0Market Cap (C$M): 1,023Shares Out., FD (M) : 769.5Total Return to Target (%) : 200.7Net Debt (Cash) (C$M): (60)Long-Term Debt (C$M): 165.1

FYE Dec 2016A 2017E 2018E 2019ESales (C$M) 16.4 39.5 150.4 257.9R&D (C$M) 88.1 88.8 75.9 72.6SG&A (C$M) 29.3 31.0 37.5 40.8EBITDA (C$M) (107.7) (83.2) 16.0 116.0EPS (C$) (0.16) (0.14) 0.01 0.11

3.5

3

2.5

2

1.5

1

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May

-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

PLINASDAQ�Biotechnology�(rebased)

Source:�FactSet


Neil Maruoka, MSc, MBA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.3073Jenny Wang | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.3643Matthew Reitsma | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7703

Share Performance: Down -40% YTD and -61% from 3-year high

Investment Thesis RecapThe past year has not been kind to ProMetic shareholders, with regulatory delays,slipping timelines, and a high cash burn. Despite these challenges, some of whichremain out of management’s hands, we believe the company is positioned for amore exciting 2018 with the expected FDA approval and US launch of ProMetic’s firstsignificant drug in Ryplazim (plasminogen).ProMetic is a developer of plasma-derived therapeutics. Using its proprietary proteincapture system, the company efficiently removes valuable proteins from human bloodplasma at high yields and purity. These proteins can then be administered as therapy topatients who may be deficient or have defective endogenous proteins. The company’sfirst plasma protein product is Ryplazim, which has been filed with the FDA and isawaiting potential approval on its April 14, 2018, PDUFA date. Plasminogen shouldbe followed by IVIG, and additional products could be approved subsequently. Weexpect significant top-line growth from new indications for Ryplazim, as well as marginexpansion as new plasma products are layered onto this powerful platform.ProMetic is also developing a biotech asset called PBI-4050 for the treatment of variousfibrotic diseases. The company has received approval to move PBI-4050 into a pivotalstudy in a fibrotic lung disease called IPF; however, we expect this study will require moreresources to complete. While still early stage, we believe that PBI-4050 could eventuallyattract interest from prospective big pharma partners.

Upcoming Potential CatalystWith no visible catalysts into the end of the year, shares of ProMetic may appear ripe fortax-loss selling. While there is always the potential for product licensing deals, we believethe timing of such transactions is impossible to predict.Looking into 2018, the next clear catalyst for ProMetic is the April 14 PDUFA date forRyplazim. Although the stock could run into this FDA decision, we do not expect anymomentum until the first quarter of next year at the earliest.

Near-term Trade OpportunityWith an expected cash runway of 18 months (including the recently announced $100million credit facility), we believe that shares of ProMetic represent an attractive buyingopportunity given the significant catalysts expected in 2018. While we could continueto see additional tax-loss selling into year-end, we recommend investors accumulate onweakness.

20 November 2017 13

Newalta Corporation

Sustainability - Oilfield Services



SPECULATIVE BUYPRICE TARGET C$1.25Price (15-Nov)Ticker

C$0.68NAL-TSX

52-Week Range (C$): 0.66 - 2.63Avg Daily Vol (000s) : 195.9Market Cap (C$M): 59.9Shares Out. (M) : 88.1Net Debt (Cash) (C$M): 331Enterprise Value (C$M): 391

FYE Dec 2016A 2017E 2018E 2019ESales (C$M) 205.4 248.9 272.4 301.0EBITDA Adj (C$M) 21.9 44.8 55.4 61.6

InterestCoverage (x) 1.0 1.9 2.7 3.1

Debt/EBITDA (x) 13.9 8.1 6.6 5.5EV/EBITDA (x) Adj 17.9 8.7 7.1 6.7

QuarterlyEBITDA Adj

Q1 Q2 Q3 Q4

2016A 0.0 2.3 8.1 11.52017E 10.5A 9.6A 13.0A 11.72018E 13.5 12.3 15.1 14.62019E 15.1 13.9 16.6 16.1

3

2.5

2

1.5

1

0.5

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

NALS&P/TSX�Capped�/�Energy�(rebased)

Source:�FactSet


Raveel Afzaal, CFA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.3027Andrew Lawlor | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.687.6362

Share performance: Down 71% YTD; down 97% from 3-year highInvestment thesis recap: Newalta owns a large network of long-lived, low-maintenance-capital, high-margin O&G waste management facilities strategically located in Canada,with a small footprint in the U.S. We believe there is significant EBITDA torque inherentin the business in an improving O&G macro environment. Given the high leverage on thebalance sheet, we believe this name has the potential to realize triple-digit returns in animproving macro environment.Upcoming potential catalystsRefinancing of Nov 2019 unsecured debentures: As discussed above, the company’sbalance sheet is highly levered. The company has drawn $60M on its senior securedfacility, spread over six lenders which have repeatedly demonstrated their support for thecompany by waiving debt covenants. As it stands today, all the relevant debt covenantson this facility are waived until 2019. The remaining unsecured debentures of $125Mmature in November 2019 and $150M in April 2021. We believe successful refinancingon November 2019 debentures could serve as a material valuation catalyst. We believethe improved oil price environment has provided the company with options, includingsecuring a second lien on its senior credit facility and replacing these unsecureddebentures with secured debentures and pushing out the maturity date. Managementintends to provide an update on the refinancing options before end of Q1/18.Improvement in O&G macro environment: Based on demonstrated performance inpast O&G cycles and management’s successful cost-saving initiatives totalling over$50M per annum, we see potential for EBITDA to increase above $70M in an improvingmacro environment (sustained $60/bbl WTI oil price environment) without any additionalgrowth capital requirements. This compares with EBITDA of $22M in 2016, our forecastof $45M for 2017 and management’s 2018 guidance of $50-60M, assuming a WTI priceenvironment of $50-55/bbl. Figure 1 shows our target price sensitivity analysis.

Figure 1: Valuation Sensitivity

Source: CanaccordGenuity estimates

Change in 2018 EBITDA ($M / %)$39 $44 $50 $55 $61 $67 $72

$1.29 -30% -20% -10% 0% 10% 20% 30%7.0x (1.02) (0.50) 0.02 0.53 1.05 1.57 2.087.4x (0.84) (0.30) 0.24 0.79 1.33 1.87 2.417.8x (0.66) (0.10) 0.47 1.04 1.60 2.17 2.738.2x (0.49) 0.10 0.70 1.29 1.88 2.47 3.068.6x (0.31) 0.31 0.92 1.54 2.16 2.77 3.399.0x (0.14) 0.51 1.15 1.79 2.43 3.07 3.729.4x 0.04 0.71 1.38 2.04 2.71 3.38 4.04EV

/EB

ITD

AM

ultip

le

Near-term trade opportunity: We believe further weakness in the stock from tax-loss selling could provide an attractive entry point for investors with high convictionin a stable $55-60/bbl WTI over the next 12-18 months, given the high debt load butsignificant upside potential.

20 November 2017 14

Tree Island Steel Ltd.

Engineering and Construction




C$2.29TSL-TSX

52-Week Range (C$): 2.01 - 5.10Avg Daily Vol (000s) : 46.7Avg Daily Vol (M) : 10.2Market Cap (C$M): 70.3Dividend /Shr (C$): 0.08Dividend Yield (%) : 3.5Net Debt (Cash) (C$M): 58Enterprise Value (C$M): 129ROIC (%) : 8.0

FYE Dec 2016A 2017E 2018E 2019ESales (C$M) 231.3 231.4 257.0 262.8EBITDA (C$M) 21.0 5.0 16.4 19.0EPS Dil (C$) 0.44 (0.03) 0.23 0.28EV/EBITDA (x) 6.1 25.8 7.8 6.8P/E (x) 5.2 25.4 10.1 8.3

Quarterly EPS Dil

Q1 Q2 Q3 Q4

2016A 0.17 0.20 0.09 (0.02)2017E 0.06A 0.02A (0.07)A (0.04)2018E 0.00 0.10 0.10 0.032019E 0.02 0.10 0.10 0.05

6

5.5

5

4.5

4

3.5

3

2.5

2

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

TSLS&P/TSX�Industrials�Index�(rebased)

Source:�FactSet


.

Yuri Lynk, MSc, CFA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.514.844.3708Christopher Keefe | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.514.284.1570

Share PerformanceDown 52% YTD; down 65% from the 3-year high of $6.45

Investment Thesis RecapWe believe Tree Island Steel is well positioned to benefit from increasing demand for itssteel wire products from the manufacturing, construction, and transportation industrieswith demand from O&G and mining on the rise. Raw material costs have increased 37%YTD and the company has taken longer than anticipated to adjust its pricing to offsetthese costs, resulting in a great deal of margin pressure. However, we view managementas strong operators, capable of restoring the business to sound footing. In the meantime,investors enjoy an attractive 3.5% dividend yield and the safety associated with a strongbalance sheet containing potential "hidden" real estate value.

Upcoming Potential CatalystWe see no significant potential catalysts for Tree Island Steel in the near term. With thatsaid, input costs have flattened, which should afford management the opportunity toadjust selling prices and at least partially restore margins. Should input costs begin todecline, Tree Island Steel shares would likely react positively.

Near-term Trade OpportunityTSL shares are down 52% YTD and we believe that tax-loss motivated selling couldprovide additional pressure through the remainder of the year. We view this as apotential buying opportunity, as investors can take advantage of resulting share priceweakness to initiate or increase a position in a company with sound fundamentals andstrong management.

20 November 2017 15

Coeur Mining, Inc.

Precious Metals - Producer



BUYPRICE TARGET US$13.00Price (15-Nov)Ticker

US$7.03CDE-NYSE

52-Week Range (US$): 6.98 - 12.30Avg Daily Vol (000s) : 3,493.0Market Cap (US$M): 1,260Shares Out. (M) : 179.2Enterprise Value (US$M): 1,313Debt/Capitalization (%) : 27NAV /Shr (US$): 2.39Net Debt/EBITDA : 0.30P/NAV (x) (US$): 2.94

FYE Dec 2016A 2017E 2018ESilver Production(000oz) 14,828 16,003 19,097

Gold Production(000oz) 358 373 450

All in SustainingCost (Silver)(US$ /oz)

14.09 14.37 13.09

Sales (US$M) 665.8 762.8 974.8EBITDA (US$M) 215.2 186.4 340.7Operating CashFlow /Shr CFPS (US$)

0.79 0.86 1.71

FCF /Shr (US$) 0.16 0.14 0.97

13

12

11

10

9

8

7

6

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

CDEPHLX�/�Gold�&�Silver�(XAU)�(rebased)

Source:�FactSet


Dalton Baretto | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7380Gautam Narayanan | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.687.5428

Share PerformanceDown 28% YTD; down 56% from 3-year high

Investment Thesis RecapWe like CDE for its size, liquidity, forecast FCF growth, improved balance sheet andstrong leverage to silver and gold prices at a relatively attractive valuation. Furthermore,the acquisition of the Silvertip mine in British Columbia should provide the companywith lead and zinc exposure (zinc is our preferred base metal, given strong commodityfundamentals). The 16% decline since October 25 (Q3 earnings release), can beattributed to the company's quarterly financial results, when CDE also increased its costguidance at three of its five operating assets. Looking ahead, we believe CDE will havea better 2018 and 2019, as Palmarejo ramps up, Rochester’s capex spend wanes andSilvertip comes into production.

Upcoming Potential CatalystsThe Silvertip mine currently appears to be on track for first production in late Q1/18, witha full ramp-up to 1,000tpd planned for the end of 2018. A key criteria for the ramp-upwill be approval of a permit amendment, which the company expects mid-year - we willbe watching for progress updates on this over H1/18, as this remains a key aspect torealizing the economics at Silvertip. Without this amendment, the operation will likely berestricted to ~400tpd. An updated technical report for the Silvertip mine is also expectedby mid-2018.CDE also expects to release updated technical reports for the Rochester and Kensingtonmines in Q1/18, as well as a reserve update for all of its assets by H1/18.

Near-term Trade OpportunityWe continue to view CDE favourably on a fundamental basis, and like the company for itsleverage to silver, gold and now base metals. We would view near-term pressure on theshares from tax-loss selling as a buying opportunity.

20 November 2017 16

Eldorado Gold Corporation





C$1.47 ; US$1.15ELD-TSX; EGO-NYSE

52-Week Range (C$): 1.44 - 5.13Avg Daily Vol (000s) : 7,653.3Market Cap (C$M): 1,167Dividend /Shr (US$): 0.01Dividend Yield (%) : 1.1Shares Out., Basic (M) : 794.0Enterprise Value (C$M): 1,259Cash (US$M): 605.6Long-Term Debt (US$M): 591.6Net Debt/EBITDA : (0.11)P/NAV (x) (C$): 0.43Total NAV 5 (US$): 2,111.6

FYE Dec 2016A 2017E 2018E 2019EGold Production(000oz) 486 271 358 379

Total Cash CostBy-Prod.(Gold)(US$/oz)

621 572 566 495

EPS Adj&Dil (US$) 0.07 0.03 0.04 0.07

P/E (x) 18.1 39.0 26.7 16.2CFPS (US$) 0.11 0.15 0.16 0.21P/CFPS (x) 10.1 7.5 7.2 5.4

5.5

5

4.5

4

3.5

3

2.5

2

1.5

1

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

ELDS&P�Global�Gold�Index�(rebased)

Source:�FactSet


Tony Lesiak | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7918Michael Fairbairn | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.6592

Share Performance: Down 65% YTD; down 84% from 3-year high, worst on TSX YTD.Investment Thesis Recap: Eldorado was dealt multiple setbacks in 2017 that will notbe resolved by year-end, in our opinion. Dialogue with Greece’s Ministry of Energy andEnvironment (MoE) continues but to date has failed to yield meaningful results withrespect to securing routine installation permits for its Skouries development project or,moreover, the ability to use best available technologies with respect to tailings (Skouries)and processing techniques (Olympias). In the interim, as expected, the Skouries projectwas placed on care and maintenance (Nov. 9, 2017). Until the outstanding issues arefully resolved, we do not expect ELD to restart development at Skouries. A change ingovernment in Greece (next scheduled election fall 2019) may be required before apositive outcome can be achieved. Our valuation continues to assume no value forSkouries and full value for Olympias only until 2023 (19% of NAV), the date at which webelieve ELD may be in contravention of its EIA (due to an inability to establish the flashsmelting requirement) for its Kassandra Mines. If we were to assume full value for all theGreek assets, including Perama Hill, our NAV could increase by over C$4.00/sh.At Kisladag (24% of NAV) management has communicated the need for additionalprocessing requirements to deal with weaker than plan gold recoveries. While additionalmetallurgical testing continues (results early 2018), the outcome is likely to be anadditional $325M (CG est.) investment for a milling solution. Although the cash positionremains robust (3Q17 $546M), ELD may have some hard capital allocation decisions(Kisladag mill, Skouries completion, Lamaque expansion). We expect ELD to roll theexisting $600M in notes (due 2020). The need to conserve spending and focus onthe core could result in deferring spending at other projects (TZ and Certej) and forexploration, in our opinion, which may hurt future optionality.Upcoming Potential Catalysts: Updates from the ongoing negotiations with the MoE.The ramp-up of Olympias should provide a near-term boost to CF particularly at higherzinc/lead prices (~44mlbs in 2018). We may also see a short-term closure at Kisladag topreserve the asset for processing with high recoveries.Near-term Trade Opportunity - Switch into Kinross: Despite the higher current impliedreturn to target (33% on 12 months) and significant optionality in Greece, ELD remainsa potential near-term value trap with no major visible re-rating catalysts due before YE.Until we have further clarity, we would recommend that investors focus on less risky,higher quality companies. Kinross (K:TSK, BUY, C$9.00 target, Focus List pick) hasbeen one of the steadiest operators in the gold sector over many years and continues totrade at a meaningful discount on both NAV and cash flow metrics. Kinross may developa safety premium given the recent event risk seen in the sector (THO, ELD, ACA, TXG,AKG, P). Upcoming catalysts: Completion of Phase One Tasiast expansion (early 2018),commencement of the Round Mountain Phase W expansion (early 2018), optimizationstudies at Paracatu to increase output, and mine life extension at Fort Knox. We expectKinross to post a strong Q4.

20 November 2017 17

Fortuna Silver Mines Inc.





C$5.25FVI-TSX

52-Week Range (C$): 5.13 - 9.18Avg Daily Vol (000s) : 564.5Market Cap (C$M): 836Shares Out. (M) : 159.2Enterprise Value (C$M): 643NAV /Shr (US$): 5.42P/NAV (x) (C$): 0.97

FYE Dec 2016A 2017E 2018ESilver Production(000oz) 7,380 8,288 8,971

Gold Production(000oz) 47 55 50

Zinc Production(000t) 20 20 18

Total Cash CostBy-Prod.(Silver)(US$/oz)

0.31 (2.55) (1.66)

Sales (US$M) 210.3 260.3 255.5EBITDA (US$M) 83.0 120.7 123.8Operating CashFlow /Shr CFPS (US$)

0.38 0.43 0.67

FCF /Shr (US$) 0.09 0.11 (0.71)

11

10

9

8

7

6

5

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May

-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

FVIPHLX�/�Gold�&�Silver�(XAU)�(rebased)

Source:�FactSet


Dalton Baretto | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7380Gautam Narayanan | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.687.5428


Investment Thesis RecapFVI is our top pick in the silver producer space, due to its strong growth and marginprofile, leverage to zinc and lead prices, and conservative balance sheet. Additionally, thecompany trades at a discount to its peers, a gap that we feel will close as Lindero furtherdevelops, and is de-risked over the next 24 months (as long as the project remains onschedule and on budget). Furthermore, the company announced that it is currently inadvanced discussions with its lenders to increase the size of its facility to $120 million,which the company believes should be sufficient to fund the Lindero capital costs alongwith operating cash flows and the current cash balance.

Upcoming Potential CatalystGiven that we do not see any catalysts on the horizon that will move the pricesignificantly until after the new year, this may prove to be a good opportunity for tax-loss selling. In 2018, we expect any development updates on the Lindero project aspotential catalysts. We also expect reserve updates at the San Jose and Caylloma minesas potential positive catalysts.

Near-term Trade OpportunityWe believe that the decline in the stock price and potential tax-loss selling provide agood buying opportunity going into 2018. We continue to like FVI for its growth profile,focus on margins, and base metals exposure. In addition, we note that the companycontinues to trade at a discount to its peers – FVI trades at 0.97x our NAV estimate,versus the peer group average of 2.0x. We continue to believe that the valuationmultiples will re-rate as Lindero gets de-risked over the next 24 months, as long as theproject remains on schedule and budget. We view near-term pressure on the shares as abuying opportunity.

20 November 2017 18

Klondex Mines Ltd.





C$2.97KDX-TSX; KLDX-NYSE

52-Week Range (C$): 2.75 - 7.73Avg Daily Vol (000s) : 534.0Market Cap (C$M): 533Shares Out., Basic (M) : 179.5Enterprise Value (C$M): 650Cash (US$M): 33.1Long-Term Debt (US$M): 23.1Net Debt/EBITDA : (0.09)P/NAV (x) (C$): 0.51

FYE Dec 2016A 2017E 2018E 2019EProduction(000oz) 159 217 246 304

Total Cash Costs(US$/oz) 710 700 676 646

EPS Adj&Dil (US$) 0.03 0.02 0.25 0.20


Quarterly EPS Adj&Dil

Q1 Q2 Q3 Q4

2016A 0.01 0.00 0.00 0.022017E (0.06)A 0.05A (0.01)A 0.042018E 0.08 0.07 0.06 0.042019E 0.06 0.05 0.04 0.04

8

7

6

5

4

3

2

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

KDXS&P�Global�Gold�Index�(rebased)

Source:�FactSet


Rahul Paul | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7289Matthew MacPhail, P.Eng | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.867.2649

Share PerformanceDown 54% YTD; down 60% from 3-year highInvestment Thesis RecapIn our view, Klondex shares may be subject to tax-loss selling over the coming month,given the 54% decline experienced YTD and the 52% YTD underperformance relative tothe S&P/TSX Gold Index. While we acknowledge the ramp-up risks associated with TrueNorth (and to a lesser extent Hollister), we believe the stock is significantly oversold atthese levels. In particular, the sell-off appears to have accelerated following the releaseof Q3/17 results which were impacted by the timing of ore processing (the stock is down18.6%, underperforming the S&P/TSX Gold Index by 18.1%).We also believe the YTD share price decline could prompt deletion from certain indices,which could add to the near-term selling pressure. Beyond that we believe the stockcould stage a rapid recovery thanks to several potential catalysts in the near term.With sequential improvements expected from Hollister and True North as well as theprocessing of mined/stockpiled ore, we forecast Q4/17 to be the strongest quarter thisyear (estimated 83% sequential increase in production at 26% lower AISC) with KDX ontrack to attain consolidated FY2017 guidance.More importantly, we believe that exploration updates from the Trinity Zone (at Midas)and Hatter Graben Zone (at Hollister) could be significant catalysts in the next fewmonths, considering their potential to significantly extend reserve/resource life withhigher-grade ounces.Upcoming Potential Catalysts• Exploration updates at the Hatter Graben zone at Hollister (Q4/17E)• Exploration updates at the Trinity zone at Midas (Q4/17E)• Exploration updates at Fire Creek – along strike/ up-dip (ongoing)• Mineral Resource Estimate for Hatter Graben at Hollister (Q1/18)• Mineral Reserve and Resource Update for Klondex – (Q1/18)

Near-term Trade OpportunityWhile we acknowledge the tax-loss (and index-deletion) related selling pressure as adistinct possibility, we would view further weakness as a buying opportunity consideringthe discounted valuation (0.49x P/NAV, a 21% discount to diversified peers) andupcoming potential catalysts in the next four months.

20 November 2017 19

Tahoe Resources Inc.





C$5.61 ; US$4.39THO-TSX; TAHO-NYSE

52-Week Range (C$): 5.31 - 15.11Avg Daily Vol (000s) : 851.2Market Cap (C$M): 1,755Dividend /Shr (US$): 0.16Dividend Yield (%) : 3.6Shares Out., Basic (M) : 312.8Enterprise Value (C$M): 1,642Cash (US$M): 123.3Long-Term Debt (US$M): 35.0Net Debt/EBITDA : (0.18)P/NAV (x) (C$): 0.42Total NAV 5 (US$): 3,320.9

FYE Dec 2016A 2017E 2018E 2019ESilver Production(000oz) 21,342 9,746 22,047 23,186

EPS Adj&Dil (US$) 0.62 0.24 0.51 0.54

Total Cash CostBy-Prod.(Silver)(US$/oz)

5.84 6.15 5.67 5.65


16

14

12

10

8

6

4

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May

-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

THOS&P�Global�Gold�Index�(rebased)

Source:�FactSet


Tony Lesiak | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7918Michael Fairbairn | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.6592

Share Performance: Down 56% YTD; down 74% from 3-year highInvestment Thesis Recap: In our view, shares of Tahoe may be subject to tax-lossselling over the coming month, given the 56% decline experienced YTD and similarunderperformance relative to the S&P/TSX Gold Index. We do note that a materialcatalyst is fast approaching with final a decision from the Constitutional Courts inGuatemala on the appeals of the license reinstatement at Escobal expected beforeyear end. While there is still residual risk with respect to the Escobal licence, we notethat the lower (Supreme) Court has been satisfied that there is no risk of immediateirreparable harm, and consequently, any deficiency in the Ministry’s original consultationprocess may be able to be performed while the (GDP relevant) mine is operating. Wesee potential for a revised longer-term mine plan at Escobal that maximizes NAV vs. thecurrent stable ~20Moz production profile.Our estimates assume production from Escobal (45% of our NAV) recommencing early in2018. Escobal could legally commence production now, however, supplies remain limitedgiven the ongoing roadblock and the Export License has yet to be renewed. Managementbelieves the export license reinstatement (takes 2 to 3 weeks normal course) will occurpending the Constitutional Court ruling. Management also continues to act to resolve theroad block issue peacefully. THO remains in a solid financial position ($147M net cashposition) with free cash flow accelerating in 2H18 even excluding Escobal.Assuming full value for Escobal, Tahoe currently trades at a 31% discount (P/NAV basis)to its senior precious metals producer peers. Assuming a two-year closure at Escobal,our NAV would decline C$1.00/sh (THO still at 27% discount to peers), while a fullclosure would result in a C$5.84 reduction in NAV (THO at 16% premium).The current de-rating has been largely attributable to the events at Escobal but were alsodue to a previous negative guidance revision for the company’s Canadian and Peruvianassets; these assets appear to have stabilized. The Shahuindo (Peru) expansion remainson track to commence mid-2018 despite minor delays due to modifications to thefinal engineering design of the crushing and agglomeration circuit. La Arena (Peru) iscoming off a strong Q3 that exceeded guidance run-rates with continued positive gradereconciliation. In our opinion this outperformance will continue into Q4 and possiblyresult in a longer mine life with higher annual production. In Timmins (Canada), the$80M Bell Creek shaft project remains on schedule and resource models for a potentialdevelopment at Whitney/Hallnor and Pamour West have been completed.Upcoming Potential Catalysts: Constitutional Court ruling on Escobal and resumption ofmining and exports. We continue to assume production from Escobal will recommenceearly in 2018.Near-term Trade Opportunity: While we acknowledge the tax-loss related sellingpressure as a distinct possibility, we would recommend buying the stock on weakness inadvance of the potentially positive catalyst (Escobal restart) in the coming months. Whilehigher risk, we see an asymmetric upside.

20 November 2017 20

Torex Gold Resources





C$13.76TXG-TSX

52-Week Range (C$): 12.42 - 33.85Avg Daily Vol (000s) : 304.0Market Cap (C$M): 1,097Shares Out., Basic (M) : 79.8Enterprise Value (C$M): 1,577Cash (US$M): 99.7Long-Term Debt (US$M): 338.7Net Debt/EBITDA : 4.10P/NAV (x) (C$): 0.40

FYE Dec 2017E 2018E 2019EProduction(000oz) 334 358 372

Total Cash Costs(US$/oz) 617 524 514

EPS Adj&Dil (US$) 0.67 1.03 1.55

P/E (x) 16.6 10.7 7.1CFPS (US$) 2.07 2.53 2.68P/CFPS (x) 5.4 4.4 4.1

Quarterly EPS Adj&Dil

Q1 Q2 Q3 Q4

2017E 0.07A 0.01A 0.14 0.442018E 0.22 0.23 0.24 0.342019E 0.37 0.38 0.40 0.40

35

30

25

20

15

10

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May

-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

TXGJunior�Gold�Miners�Index�(rebased)

Source:�FactSet


Rahul Paul | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7289Matthew MacPhail, P.Eng | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.867.2649

Share PerformanceDown 36% YTD; down 59% from 3-year highInvestment Thesis RecapIn our view, shares of Torex Gold could be subject to tax-loss selling over the comingmonth given the 36% decline YTD and the 34% underperformance relative to the S&P/TSX Gold Index, reflecting the operational challenges and the ongoing illegal blockadeat El Limon, which resulted in a guidance downgrade and has created uncertaintysurrounding the timing of a potential restart of operations. While we acknowledge thenear-term volatility that could result from the security/labour/social challenges, ourunderstanding so far suggests that the issues can be resolved, paving the way for arestart of operations. Although difficult to accurately predict the timing of a restart, weare optimistic that operations could resume by the end of the year.Moreover, with the rainy season behind us and the expected restoration of access tohigher grade ore, we expect a relatively strong operational recovery once operationsrestart. In addition, we see a number of other catalysts that could shift focus to growthprojects, such as the sub-sill potential (reserve, resource and mine plan expected by late2017/early 2018), a site-wide technical report on ELG incorporating an updated MediaLuna PEA (H1/18), and continued step-out drill results for the sub-sill deposit.Upcoming Potential Catalysts• Resolution to blockade and return to normal mining operations• Sub-sill initial reserve and mine plan (late 2017/early 2018)• Site-wide technical report incorporating an updated Media Luna PEA (H1/18E)Near-term Trade OpportunityWe believe that the YTD share price underperformance could result in tax-loss selling.While acknowledging the difficulty in accurately predicting the timeline for a recovery,we view the stock as significantly oversold at these levels. As such, we would view anyfurther weakness as a buying opportunity for risk-tolerant investors, considering thediscounted valuation (0.38x P/NAV, a 39% discount to peers) and upcoming potentialcatalysts.

20 November 2017 21

Enbridge Inc.

Pipelines




C$44.06ENB-TSX

52-Week Range (C$): 46.61 - 58.56Avg Daily Vol (000s) : 2,747.7Market Cap (C$B): 77.2Shares Out. (M) : 1,642.0Dividend /Shr (C$): 2.45Dividend Yield (%) : 5.5Shares Out., Basic (M) : 1,635.0Total Return to Target (%) : 30.7Net Debt (Cash) (C$M): 79,556

FYE Dec 2016A 2017E 2018EEBIT Adj (C$M) 4,662 7,180 8,811EBITDA Adj (C$M) 6,902 10,459 12,568

EV/EBITDA (x) 0.0 16.4 14.6FCF Yield (%) 6.3 8.0 10.0Net Debt/TCE(%) 61 49 50

Debt/EBITDA (x) 6.0 6.4 5.6Payout Ratio (%) 52.4 64.3 58.1

65

60

55

50

45

40

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

ENBS&P/TSX�Composite�Index�(rebased)

Source:�FactSet


David Galison, BScME, MBA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.687.5421Shawn Shangguan | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7305

Share Performance: Down 23% YTD and 33% from 3-year highInvestment Thesis Recap: With the completion of the Spectra acquisition, ENB is a morediversified company with a $31B secured capital program. ENB also has a very largedevelopment pipeline, which could eventually be sanctioned. This growth is expected tosupport the targeted 10%-12% dividend growth profile through 2024.What is Causing the Weakness? Besides the significant complexity inherent in the ENBstructure, there are three main concerns that have been causing the weakness. First,on the Q3/17 conference call when asked if it would consider tapering the targeteddividend growth in the near term and making it up as new assets enter service, ENB didnot say no. What ENB said was that it was developing a 5-year business plan, which willbe released during the investor day in December. If ENB were ultimately to lower thenear-term dividend growth, we think this could reduce some near-term funding concerns.The next concern relates to potential equity funding at the parent to support the ongoingequity capital at ENB’s sponsored vehicles. Ultimately, support funding will depend onthe sponsored vehicles' ability to access markets at favorable rates.• Recall in March 2016, ENB completed a C$2.3 billion equity offer to fulfill the equity

funding requirements through 2017, which included equity funding that was originallyintended to be raised by its sponsored vehicles.

• Considering the current rating concerns with Enbridge Income Fund (ENF-TSX | HOLD,C$34.00 PT), investors are concerned that ENB could once again step in to backstopequity funding requirements for ENF. We model ENB Income Fund to raise $600Min equity in 1H/18. Recall, ENF is targeting equity funding in the $600-$800 millionrange.

The third concern weighing on shares relates to permitting in Minnesota for the Line 3Replacement program (LR3).• Public hearings are currently underway and a final decision from the Minnesota Public

Utilities Commission (MPUC) is expected in April 2018.• We recognize that with permitting there are always risks, particularly in the current

environment. However, as we have highlighted previously, LR3 is an integrity program,and these typically have a higher probability of receiving permitting approval. Thecurrent line is running at half-capacity and needs to be decommissioned.

Upcoming Potential Catalyst: We see two near-term catalysts for the shares: 1) theinvestor day scheduled December 12 & 13, where ENB is expected to provide its first5-year outlook post-Spectra acquisition; and 2) the LR3’s permitting decision, which isexpected in April 2018.Near-term Trade Opportunity: We continue to view ENB favourably on a fundamentalbasis. We would see near-term pressure on the shares resulting from tax-loss selling as abuying opportunity.

20 November 2017 22

2

We recognize that with permitting there are always risks, particularly in the current

environment. However, as we have highlighted previously, the LR3 program is an

integrity program. Integrity programs typically have a higher probability of receiving

permitting approval. The current line is running at half-capacity and needs to be

decommissioned.

Upcoming Potential Catalyst: There are two near-term potential catalysts for the

shares. The first is the investor day scheduled December 12 & 13. Enbridge is

anticipated to provide its first five-year outlook post-Spectra acquisition. The next

catalyst would be a the LR3’s permitting decision, which is expected in April 2018.

Near-term Trade Opportunity: We continue to view ENB favourably on a fundamental

basis. We would view near-term pressure on the shares as a buying opportunity.

Technical Overview – ENB

From a technical perspective, Enbridge (ENB) is likely to see further near-term

weakness; however, ENB is near levels that would suggest a capitulation low is at

hand.

Figure 1: Weekly Chart – ENB


Top Panel: MACD – The stock recently triggered a new weekly “mechanical sell”

signal, a technical negative (see far right red circle).

Second Panel: SCTR – Relative strength has been trending lower versus the TSX

since Q4 2016; however, the stock is showing early signs of improvement (see

blue circle).

Third Panel: Price – The stock is testing important support near 44.12. A close

below this level would see a quick move lower to 41.55 as there has been

relatively little volume traded between 43 – 42 (see red ellipse).

Bottom Panel: Volume and On-Balance-Volume – On-Balance-Volume continues to

trend lower and selling volume has been higher than average over the last few

weeks (see red circle). In our view, the conditions are ripe for a capitulation low.


20 November 2017 23

3

Figure 2: Quest triAngle Score – ENB

Source: Canaccord Genuity Research

Value and Quality rank relatively well for ENB; however, Momentum remains

weak. A close above resistance near 45.93 would help to increase the

Momentum score.


20 November 2017 24

Celestica Inc.

Semiconductors and Related Technologies


US Equity Research

BUYPRICE TARGET US$14.00Price (15-Nov)Ticker

US$10.54 ; C$15.29CLS-NYSE; CLS-TSX

52-Week Range (US$): 14.74 - 9.79Avg Daily Vol (000s) : 452.0Market Cap (US$M): 1,516Shares Out. (M) : 145.7Total Return to Target (%) : 17.6Enterprise Value (US$M): 1,419Net Cash (US$M): 314.9Net Cash /Shr (US$): 2.16

FYE Dec 2016A 2017E 2018ESales (US$M) 6,017 6,112 6,303EBITDA (US$M) 290.8 291.6 291.2EPS Adj&Dil (US$) 1.40 1.22 1.24

EV/Sales (x) 0.2 0.2 0.2EV/EBITDA (x) 4.9 4.9 4.9P/E (x) 8.5 9.8 9.6

16

15

14

13

12

11

10

9

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

CLSS&P/TSX�Composite�Index�(rebased)

Source:�FactSet


Robert Young, MBA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7341Lee Edwards, CFA | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.869.7364

Share PerformanceDown 15% YTD; down 36% from 3-year high

Investment Thesis RecapCelestica has provided weak results and outlook in each of the last two quarters, drivenby program ramp delays and material constraints. The company announced a significantglobal, company-wide restructuring with details to be provided in Q4. The restructuringis expected to realign costs in the CCS business to allow for an expansion of lower-margin, high-ROIC fulfillment demand. Despite the tepid outlook, Celestica sees strongend-market demand through 2018 and highlighted multiple ramps in its higher-marginATS (formerly diversified) business. A significant valuation discount to peers is now thekey driver of our BUY thesis, although we believe action on the company’s acquisitionaspirations is an additional reason to own the stock. Our target of US$14.00 is based on5.5x NTM EBITDA using NTM prospective cash assuming $100M in restructuring costs.

Upcoming Potential CatalystWe do not expect Celestica to report financial results before late January, and while thecompany has confirmed a renewed NCIB, we do not expect significant activity beforeH2/18. M&A is a potential catalyst. While we do see concern on valuation, we believethat accretive acquisitions would be well received by investors, and represent a potentialcatalyst for near-term share price appreciation. Celestica has access to $850-950M ofpotential cash for M&A from its under-levered balance sheet, assuming management’swillingness to lever up to 3.0-3.5x of EBITDA. Celestica reported its fully staffed businessdevelopment activities have a full pipeline of targets. We may see action on Celestica’sM&A focussed strategy, although we do not expect announcements before the end of theyear. As well, we may see an update on the company’s restructuring plans, although wesuspect this will come with the Q4 report in late January.

Near-term Trade OpportunityWe view CLS favourably on a fundamental basis given the potential for M&A activity andthe current valuation discount to peers. We would view near-term pressure on the sharesas a buying opportunity for medium-term-oriented investors, but see a lack of catalysts inQ4. As such, we believe CLS is a candidate for tax-loss selling.ValuationCelestica is trading at an EV of 4.2x C2018E EBITDA, at a discount to the EMS peeraverage at 7.6x. While we do expect share weakness on the back of the Q3 results andpotential tax-loss selling, we believe the valuation discount is undeserved: Flextronics,Sanmina and Jabil, Celestica’s close peers, trade at 7.8x, 6.0x and 4.0x, respectively,on consensus estimates. Celestica trades slightly below the midpoint of its historicalvaluation range. Consequently, we would view tax-loss selling pressure as a buyingopportunity.

20 November 2017 25

2

Technical Overview – CLS

The technical profile of CLS suggests that a capitulation low is at hand.

Figure 1: Weekly Chart – CLS


Top Panel: MACD – The stock recently triggered a new weekly “mechanical sell”

signal, a technical negative (see far right red circle). However, downside

momentum is decreasing and a positive momentum divergence (see blue arrow)

supports an intermediate-term low.

Second Panel: SCTR – Relative strength versus the TSX has been in a downtrend

since the summer (see red arrow). However, it is showing early signs of

improvement (see blue circle).

Third Panel: Price – The stock bounced off important support near 12.58. First

resistance is near 13.60, important resistance is near 14.23.

Bottom Panel: Volume and On-Balance-Volume – Volume and On-Balance-Volume

are showing signs of accumulation, an early technical positive (see blue circles).


20 November 2017 26

UrtheCast Corporation

Communications Technology



SPECULATIVE BUYPRICE TARGET C$2.00Price (15-Nov)Ticker

C$1.05UR-TSX

52-Week Range (C$): 0.69 - 2.17Avg Daily Vol (000s) : 249.8Market Cap (C$M): 127Shares Out. (M) : 120.9Total Return to Target (%) : 90.5Enterprise Value (C$M): 137Net Cash (C$M): (9.6)Net Cash /Shr (C$): (0.08)

FYE Dec 2016A 2017E 2018ESales (C$M) 49.9 42.0 62.5EBITDA Adj (C$M) 5.6 (2.1) 19.6

EPS Adj&Dil (C$) (0.28) (0.17) (0.01)

EV/Sales (x) 2.7 3.2 2.2EV/EBITDA (x) 24.2 (65.9) 7.0P/E (x) NM NM NM

2.2

2

1.8

1.6

1.4

1.2

1

0.8

0.6

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

URS&P/TSX�Composite�Index�(rebased)

Source:�FactSet


Doug Taylor, CFA | Analyst | Canaccord Genuity Corp. (Canada) | [email protected] | 1.416.867.6101Tao Ding, CFA | Associate | Canaccord Genuity Corp. (Canada) | [email protected] | 416.869.7375

Recent Share Performance: Up 22% YTD, but down 52% from 52-week high early thisyear and well below multi-year highs at $4.99

Investment Thesis Recap:We remain of the view that the progress of the transformational constellations(especially UrtheDaily) and satellite build awards could lead to multiple re-rating andsignificant financial improvements in the near and medium term.

Upcoming Potential Catalyst:There are many potential catalysts ahead, though we understand the timing is hardto predict. This includes: (1) the final appropriation approval and technology transferpermits for the SAR-XL satellite; (2) securing another standalone SAR satellite buildaward (the discussions are advancing per management); (3) the conversion of theother two MOUs for its OptiSAR program; (4) concluding the $175M financing for theUrtheDaily constellation by year-end; and (5) finalizing a major contract that slipped fromQ3.

Near-term Trade Opportunity:While we could see some pressure through year-end from tax-motivated selling, werecommend investors to buy on dips due to the aforementioned potential catalysts. Webelieve names with UrtheCast’s binary potential returns distribution are more popularearly in the new year.

20 November 2017 27

Appendix: Important DisclosuresAnalyst CertificationEach authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) therecommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent andobjective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoringanalyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to thespecific recommendations or views expressed by the authoring analyst in the research.Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons ofCanaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communicationswith a subject company, public appearances and trading securities held by a research analyst account.Sector CoverageIndividuals identified as “Sector Coverage” cover a subject company’s industry in the identified jurisdiction, but are not authoringanalysts of the report.

Investment RecommendationDate and time of first dissemination: November 20, 2017, 01:21 ETDate and time of production: November 20, 2017, 01:22 ETCompendium ReportThis report covers six or more subject companies and therefore is a compendium report and Canaccord Genuity and itsaffiliated companies hereby direct the reader to the specific disclosures related to the subject companies discussed in thisreport, which may be obtained at the following website (provided as a hyperlink if this report is being read electronically) http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx; or by sending a request to Canaccord Genuity Corp. Research, Attn:Disclosures, P.O. Box 10337 Pacific Centre, 2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a requestby email to [email protected]. The reader may also obtain a copy of Canaccord Genuity’s policies and proceduresregarding the dissemination of research by following the steps outlined above.

Distribution of Ratings:Global Stock Ratings (as of 11/20/17)Rating Coverage Universe IB Clients

# % %Buy 565 60.11% 40.35%Hold 261 27.77% 26.05%Sell 21 2.23% 9.52%Speculative Buy 93 9.89% 65.59%

940* 100.0%*Total includes stocks that are Under Review

Canaccord Genuity Ratings SystemBUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.

HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.

SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.

NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the designated investment or therelevant issuer.Risk QualifierSPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in thestock may result in material loss.

12-Month Recommendation History (as of date same as the Global Stock Ratings table)


20 November 2017 28

http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx

http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx

A list of all the recommendations on any issuer under coverage that was disseminated during the preceding 12-month periodmay be obtained at the following website (provided as a hyperlink if this report is being read electronically) http://disclosures-mar.canaccordgenuity.com/EN/Pages/default.aspxGeneral DisclaimersSee “Required Company-Specific Disclosures” above for any of the following disclosures required as to companies referred to in thisreport: manager or co-manager roles; 1% or other ownership; compensation for certain services; types of client relationships; researchanalyst conflicts; managed/co-managed public offerings in prior periods; directorships; market making in equity securities and relatedderivatives. For reports identified above as compendium reports, the foregoing required company-specific disclosures can be found ina hyperlink located in the section labeled, “Compendium Reports.” “Canaccord Genuity” is the business name used by certain whollyowned subsidiaries of Canaccord Genuity Group Inc., including Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord GenuityCorp., and Canaccord Genuity (Australia) Limited, an affiliated company that is 50%-owned by Canaccord Genuity Group Inc.The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadianbroker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealerwith principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer withprincipal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer withprincipal offices located in Sydney and Melbourne.The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon(among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analystshave not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Bankingactivities, or to recommendations contained in the research.Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising asa result of publication or distribution of research. This research has been prepared in accordance with Canaccord Genuity’s policy onmanaging conflicts of interest, and information barriers or firewalls have been used where appropriate. Canaccord Genuity’s policy isavailable upon request.The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with theexception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity,its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has notindependently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information containedin this research constitute Canaccord Genuity’s judgement as of the date of this research, are subject to change without notice and areprovided in good faith but without legal responsibility or liability.From time to time, Canaccord Genuity salespeople, traders, and other professionals provide oral or written market commentary ortrading strategies to our clients and our principal trading desk that reflect opinions that are contrary to the opinions expressed in thisresearch. Canaccord Genuity’s affiliates, principal trading desk, and investing businesses also from time to time make investmentdecisions that are inconsistent with the recommendations or views expressed in this research.This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designatedinvestments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designatedinvestments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under nocircumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or companythat is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared forgeneral circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of anyparticular person. Investors should obtain advice based on their own individual circumstances before making an investment decision.To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liabilitywhatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.Research Distribution PolicyCanaccord Genuity research is posted on the Canaccord Genuity Research Portal and will be available simultaneously for access by allof Canaccord Genuity’s customers who are entitled to receive the firm's research. In addition research may be distributed by the firm’ssales and trading personnel via email, instant message or other electronic means. Customers entitled to receive research may alsoreceive it via third party vendors. Until such time as research is made available to Canaccord Genuity’s customers as described above,Authoring Analysts will not discuss the contents of their research with Sales and Trading or Investment Banking employees without priorcompliance consent.For further information about the proprietary model(s) associated with the covered issuer(s) in this research report, clients shouldcontact their local sales representative.Short-Term Trade IdeasResearch Analysts may, from time to time, discuss “short-term trade ideas” in research reports. A short-term trade idea offers a near-term view on how a security may trade, based on market and trading events or catalysts, and the resulting trading opportunity that maybe available. Any such trading strategies are distinct from and do not affect the analysts' fundamental equity rating for such stocks. A


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short-term trade idea may differ from the price targets and recommendations in our published research reports that reflect the researchanalyst's views of the longer-term (i.e. one-year or greater) prospects of the subject company, as a result of the differing time horizons,methodologies and/or other factors. It is possible, for example, that a subject company's common equity that is considered a long-term ‘Hold' or 'Sell' might present a short-term buying opportunity as a result of temporary selling pressure in the market or for otherreasons described in the research report; conversely, a subject company's stock rated a long-term 'Buy' or “Speculative Buy’ could beconsidered susceptible to a downward price correction, or other factors may exist that lead the research analyst to suggest a sale overthe short-term. Short-term trade ideas are not ratings, nor are they part of any ratings system, and the firm does not intend, and does notundertake any obligation, to maintain or update short-term trade ideas. Short-term trade ideas are not suitable for all investors and arenot tailored to individual investor circumstances and objectives, and investors should make their own independent decisions regardingany securities or strategies discussed herein. Please contact your salesperson for more information regarding Canaccord Genuity’sresearch.For Canadian Residents:This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research and its disseminationin Canada. Canaccord Genuity Corp. is registered and regulated by the Investment Industry Regulatory Organization of Canada (IIROC)and is a Member of the Canadian Investor Protection Fund. Canadian clients wishing to effect transactions in any designated investmentdiscussed should do so through a qualified salesperson of Canaccord Genuity Corp. in their particular province or territory.For United States Persons:Canaccord Genuity Inc., a US registered broker-dealer, accepts responsibility for this research and its dissemination in the United States.This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing to effecttransactions in any designated investment discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analystsemployed outside the US, as specifically indicated elsewhere in this report, are not registered as research analysts with FINRA. Theseanalysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSERule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analystaccount.For United Kingdom and European Residents:This research is distributed in the United Kingdom and elsewhere Europe, as third party research by Canaccord Genuity Limited,which is authorized and regulated by the Financial Conduct Authority. This research is for distribution only to persons who are EligibleCounterparties or Professional Clients only and is exempt from the general restrictions in section 21 of the Financial Services andMarkets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is beingdistributed in the United Kingdom only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) (High NetWorth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005(as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. This material is not fordistribution in the United Kingdom or elsewhere in Europe to retail clients, as defined under the rules of the Financial Conduct Authority.For Jersey, Guernsey and Isle of Man Residents:This research is sent to you by Canaccord Genuity Wealth (International) Limited (CGWI) for information purposes and is not to beconstrued as a solicitation or an offer to purchase or sell investments or related financial instruments. This research has been producedby an affiliate of CGWI for circulation to its institutional clients and also CGWI. Its contents have been approved by CGWI and we areproviding it to you on the basis that we believe it to be of interest to you. This statement should be read in conjunction with your clientagreement, CGWI's current terms of business and the other disclosures and disclaimers contained within this research. If you are in anydoubt, you should consult your financial adviser.CGWI is licensed and regulated by the Guernsey Financial Services Commission, the Jersey Financial Services Commission and the Isleof Man Financial Supervision Commission. CGWI is registered in Guernsey and is a wholly owned subsidiary of Canaccord Genuity GroupInc.For Australian Residents:This research is distributed in Australia by Canaccord Genuity (Australia) Limited ABN 19 075 071 466 holder of AFS Licence No234666. To the extent that this research contains any advice, this is limited to general advice only. Recipients should take into accounttheir own personal circumstances before making an investment decision. Clients wishing to effect any transactions in any financialproducts discussed in the research should do so through a qualified representative of Canaccord Genuity (Australia) Limited. CanaccordGenuity Wealth Management is a division of Canaccord Genuity (Australia) Limited.For Hong Kong Residents:This research is distributed in Hong Kong by Canaccord Genuity (Hong Kong) Limited which is licensed by the Securities and FuturesCommission. This research is only intended for persons who fall within the definition of professional investor as defined in the Securitiesand Futures Ordinance. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. Recipients ofthis report can contact Canaccord Genuity (Hong Kong) Limited. (Contact Tel: +852 3919 2561) in respect of any matters arising from, orin connection with, this research.Additional information is available on request.


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Copyright © Canaccord Genuity Limited. 2017 – Member LSE, authorized and regulated by the Financial Conduct Authority.

Copyright © Canaccord Genuity Inc. 2017 – Member FINRA/SIPC

Copyright © Canaccord Genuity (Australia) Limited. 2017 – Participant of ASX Group, Chi-x Australia and of the NSX. Authorized andregulated by ASIC.

All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to CanaccordGenuity Corp., Canaccord Genuity Limited, Canaccord Genuity Inc or Canaccord Genuity Group Inc. None of the material, nor its content,nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express writtenpermission of the entities listed above.None of the material, nor its content, nor any copy of it, may be altered in any way, reproduced, or distributed to any other partyincluding by way of any form of social media, without the prior express written permission of the entities listed above.


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