Canexus Corporation CUS 183.2m $738.3m $4.03 $3.75 · PDF fileMCAN Mortgage Corporation MKP...

ACUMEN CAPITAL FINANCE PARTNERS LIMITED | SUITE 700 – 404 – 6th AVENUE SW | CALGARY, AB | T2P 0R9 MAIN PHONE: 403.571.0300 | TOLL FREE: 1.888.422.8636

October 17, 2014 Small Cap Growth Update (Calendar Q314)

The next reporting period will be starting in early November (we provide a list of release dates – Figure 5 on page 4 in this document). We discuss our expectations for stock performance and discuss potential opportunities. Economic factors have blurred the outlook for most of our names, and investors are no longer confident in what growth rates to expect. Some of our companies have positive near term fundamentals that point to attractive intrinsic value, but given market conditions pricing expectations have been reset and price moves will likely find more upwards resistance.

The first table summarizes stock performance, showing that the collective expectation of investors accelerated to the downside in the last month. As one can see from the one year returns, some of the names have shown good performance, and it is only in recent months they started to give back the gains.

FIGURE 1 |SPECIAL SITUATIONS COVERAGE LIST | STOCK PERFORMANCE

Source: Bloomberg, Acumen Capital Partners, Figures subject to rounding

We take this opportunity to review our names and highlight the stocks that are setting up with attractive price points relative to the potential of longer term value creation. As is typical in these market sell offs, the market becomes less discerning when comparing our companies to the peers and price-out the potential for growth. We review our growth expectations for all the companies and in certain cases we make adjustments to our estimates and target prices where the risk has increased that growth may be below previous levels.

Company Ticker S/O (M)Market Cap

($M)

Recent Price

(Oct 16, 2014)

52 Week

Low

52 Week

High

1-month

return (%)

3-month

return (%)

1-year

return (%)

Alaris Royalty Corp. AD 32.0m $929.5m $29.05 $23.79 $37.70 -11.6% 2.3% -18.0%

AlarmForce Industries Inc. AF 11.7m $131.1m $11.20 $8.20 $11.60 -2.6% -2.2% 22.5%

Black Diamond Group Limited BDI 42.9m $894.3m $20.85 $19.66 $35.99 -24.9% -36.2% -17.3%

Canexus Corporation CUS 183.2m $738.3m $4.03 $3.75 $7.57 -17.2% -12.6% -43.2%

Cervus Equipment Corp. CVL 15.2m $272.2m $17.87 $17.80 $24.52 -9.7% -15.5% -14.3%

Computer Modelling Group CMG 79.0m $853.5m $10.81 $10.06 $15.74 -9.9% -26.4% -11.1%

CWC Energy Services Corp. CWC 270.5m $200.2m $0.74 $0.66 $1.24 -22.9% -26.0% 4.2%

DirectCash Payments Inc. DCI 17.6m $277.0m $15.75 $12.39 $20.50 -3.7% 4.9% -13.1%

Gamehost Inc. GH 23.8m $389.8m $16.40 $13.75 $17.21 -0.2% 2.8% 17.1%

Input Capital Corp. INP 81.5m $167.0m $2.05 $1.57 $2.85 -13.5% -10.9% 27.3%

K-Bro Linen Inc. KBL 7.1m $283.5m $39.81 $32.82 $40.99 1.8% 2.5% 19.9%

MCAN Mortgage Corporation MKP 20.7m $291.3m $14.09 $11.60 $15.29 -3.0% -2.6% 19.9%

Mediagrif Interactive Technologies Inc. MDF 15.8m $284.5m $17.99 $16.10 $20.93 -2.8% -5.1% -8.8%

Northern Frontier Corp. FFF 23.2m $22.1m $0.95 $0.88 $4.02 -43.8% -64.2% -73.1%

People Corporation PEO 39.6m $106.9m $2.70 $1.20 $3.10 -11.2% 1.9% 116.0%

Primary Energy Recycling Corp. PRI 44.7m $207.9m $4.65 $4.15 $6.01 -20.5% -15.3% -2.9%

Stella-Jones Inc. SJ 68.8m $2080.4m $30.22 $25.02 $32.74 2.2% 4.1% 12.0%

Special Situations Q314 Review

ACUMEN CAPITAL | RESEARCH ENERGY. GROWTH. VALUE.

Brian D. Pow, MBA |Vice President Research and Equity Analyst | (403) 571-0303 | [email protected] Mark Zalucky |Research Associate | (403) 410-6840 | [email protected]

mailto:[email protected]

mailto:[email protected]

October 17, 2014 ACUMEN CAPITAL | RESEARCH ENERGY. GROWTH. VALUE.

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Special Situations Q314 Review Acumen Capital Finance Partners Limited #700, 404 – 6 Avenue SW | Calgary, AB | T2P 0R9| Main Phone: 403-571-0300

BEST IDEAS

We highlight our best near term ideas. We chose these names as we expect potential catalysts in the next 3 – 12 months that will advance the business plans and drive incremental value beyond organic growth. These names are less cyclical, and investors should be buying or adding to positions. Nothing has materially changed for these names, and they are now at attractive prices. The companies are all fiscally strong and have historically made strong progress during turbulent times. The quality and growth of earnings coupled with potential catalysts should help drive the stock prices higher.

AD – With the recent pull back the stock is no longer pricing in new investments. The existing partners are all relatively healthy, and it’s reasonable to expect that we will see a positive reset for the group of royalties. More importantly AD is a little behind in terms of adding new investments, and we expect the balance of the year to be active. We have historically used DCF analysis to arrive at our target price, given the predictability of revenue from the partners.

KBL – There is a number of future catalysts that are coming into view that have the potential to move the Company to a new level after trading in a narrow range for the last year. KBL is the natural “go-to” for governments to outsource their laundry needs. We are upgrading the stock to a BUY.

PEO – People is another one of our defensive calls with acquisitions as potential catalysts for the name. Group benefits plans are not a discretionary expenditure and tend to have built in inflationary pressures which should help the Company with its growth objectives. The Company has a clean balance sheet with excess cash raised through a recent financing for Management to execute its plans.

SJ – The Company entered F14 primed for growth from acquisitions and strong underlying market fundamentals. Pressure on margins took away some of the appeal in the first half of the year, but we expect that margins over time will head back in the right direction. The pole replacement cycle will produce above average growth for the foreseeable future, adding to the attractiveness of the investment. ATTRACTIVE YIELDS

Even with uncertainty and the potential for growth to track below trend, payment of a dividend can provide some underlying support to the share price. Figure 2 looks at our dividend paying names. The most attractive yield against payout at current price levels with a supportive balance sheet and a history of dividend increases include AD, BDI, CMG, and CVL. Of the higher yield stocks (> 6.0%), we would recommend CWC, DCI and MKP as the safest names.

FIGURE 2 |SPECIAL SITUATIONS COVERAGE LIST | DIVIDEND YIELD & PAYOUT


2014E Payout 3 Year Dividend

Annualized Paid Recent Price Target Price Ratio CAGR

Alaris Royalty Corporation $1.50 Monthly 5.2% 4.2% 86.6% 13.7%

AlarmForce Industries Inc. $0.12 Quarterly 1.1% 1.0% 76.2% n/a

Black Diamond Group Ltd. $0.96 Monthly 4.6% 3.5% 30.6% 18.6%

Canexus Corporation $0.40 Quarterly 9.9% 7.7% 123.5% -10.0%

Cervus Equipment Corporation $0.83 Quarterly 4.6% 3.5% 24.9% 4.9%

Computer Modelling Group $0.40 Quarterly 3.7% 2.8% 98.2% 22.1%

CWC Energy Services Corp. $0.07 Quarterly 9.5% 6.4% 26.2% n/a

DirectCash Payments Inc. $1.44 Monthly 9.1% 5.8% 54.1% 1.4%

Gamehost Inc. $0.88 Monthly 5.4% 5.1% 71.0% 0.0%

Input Capital Corp. n/a n/a n/a n/a n/a n/a

K-Bro Linen Inc. $1.20 Monthly 3.0% 2.9% 44.2% 2.8%

MCAN Mortgage Corporation $1.12 Quarterly 7.9% 6.9% 100.0%* 1.2%

Mediagrif Interactive Technologies Inc. $0.40 Quarterly 2.2% 1.8% 31.0% 7.7%

Northern Frontier Corp. $0.10 Quarterly 10.5% 5.0% 19.9% n/a

People Corporation n/a n/a n/a n/a n/a n/a

Primary Energy Recycling Corp. $0.28 Quarterly 6.0% 4.7% 41.6% n/a

Stella-Jones Inc. $0.28 Quarterly 0.9% 0.8% 17.0% 29.1%

*Mortgage Investment Corps must pay 100% of taxable income in the form of a dividend.

Dividend Dividend YieldCompany


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Figure 3 is a list of the coverage list with updated target price information. We highlight the valuation method used to derive our target, and the changes relate primarily to a reset of the peer groups which we discuss below.

FIGURE 3 |SPECIAL SITUATIONS COVERAGE LIST | TARGET PRICE AND RECOMMENDATION UPDATE

Source: Acumen Capital Partners, Figures subject to rounding

What the Peer Multiples Are Saying

In reviewing our current price targets, as noted above we typically use a combination of valuation methods to arrive at our targets. For a number of the stocks we use historical trading multiples in our valuation methodology rather than peer multiples as a result of better growth rates, or the uniqueness of their business model, and complement this with discounted cash flow analysis. With the downturn in the market, investors appear to have become less selective and, for many of our names, stock prices are approaching the peer group multiples. Figure 4 highlights the change in peer group multiples at the date of this report in comparison to recent updates for each of the companies. The new prices in the right column probably provide a good sense of the downside risk in each of the names relative to our target prices.

FIGURE 4 |SPECIAL SITUATIONS COVERAGE LIST | F15 EV/EBITDA PEER GROUP MULTIPLE CHANGES


Old New Old New

Alaris Royalty Corporation BUY BUY $36.00 $36.00 DCF

AlarmForce Industries Inc. HOLD HOLD $12.10 $12.10 Simple average: DCF & P/RMR

Black Diamond Group Ltd. BUY BUY $32.50 $27.40 Simple average: DCF & Peer EV/EBITDA

Canexus Corporation SPEC BUY SPEC BUY $5.50 $5.20 60% DCF, 40% Peer EV/EBITDA

Cervus Equipment Corporation BUY BUY $24.60 $23.70 Simple average: DCF & Peer EV/EBITDA

Computer Modelling Group BUY BUY $15.80 $14.50 Simple average: DCF & Forward P/E

CWC Energy Services Corp. SPEC BUY SPEC BUY $1.20 $1.10 Simple average: DCF & Peer EV/EBITDA

DirectCash Payments Inc. BUY BUY $25.00 $25.00 Simple average: DCF & Peer EV/EBITDA

Gamehost Inc. BUY BUY $17.30 $17.30 Simple average: DCF & Historical EV/EBITDA

Input Capital Corp. BUY BUY $4.00 $4.10 Simple average: DCF & Peer EV/EBITDA

K-Bro Linen Inc. HOLD BUY $39.50 $41.20 Simple average: DCF & Peer EV/EBITDA

MCAN Mortgage Corporation BUY BUY $16.80 $16.20 Simple average: Historical P/BV & Peer P/E

Mediagrif Interactive Technologies Inc. BUY BUY $21.80 $21.70 Simple average: DCF & Peer EV/EBITDA

Northern Frontier Corp. SPEC BUY SPEC BUY $2.20 $2.00 Simple average: DCF & Peer EV/EBITDA

People Corporation BUY BUY $3.25 $3.15 Simple average: DCF & Peer EV/EBITDA

Primary Energy Recycling Corp. BUY BUY $6.00 $6.00 Simple average: DCF & Peer EV/EBITDA

Stella-Jones Inc. BUY BUY $35.50 $35.50 Simple average: DCF & Historical P/E

Company Valuation MethodRecommendation Target

Old Peer Multiple Old Implied Peer Price New Peer Multiple New Implied Peer Price

F15E EV/EBITDA F15E F15E EV/EBITDA F15E

Black Diamond Group Ltd. 6.9x $26.57 6.5x $25.12

Canexus Corporation 10.7x $5.34 9.6x $4.50

Cervus Equipment Corporation 7.4x $24.69 6.9x $22.74

Computer Modelling Group* 37.7x $13.12 27.5x $9.57

CWC Energy Services Corp. 4.9x $1.05 4.2x $0.89

DirectCash Payments Inc. 7.2x $25.09 7.2x $25.09

Input Capital Corp. 15.2x $4.35 16.0x $4.55

K-Bro Linen Inc. 8.7x $33.06 10.1x $38.68

MCAN Mortgage Corporation* 11.2x $15.31 10.1x $13.81

Mediagrif Interactive Technologies Inc. 13.2x $21.99 13.2x $22.03

Northern Frontier Corp. 5.8x $2.05 5.2x $1.74

People Corporation 9.5x $2.78 8.6x $2.51

Primary Energy Recycling Corp. 8.2x $5.67 8.3x $5.71

*F15E P/E Peer Multiples

Company


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Figure 5 is a list of expected reporting dates for our names. We provide our estimates for the upcoming quarters in the individual Company discussions.

FIGURE 5 |SPECIAL SITUATIONS COVERAGE LIST | REPORTING CHART

Source: Coverage List Companies

Alaris Royalty Corp. Q314 November 13, 2014

AlarmForce Industries Inc. F14 Early 2015

Black Diamond Group Limited Q314 November 5, 2014

Canexus Corporation Q314 November 6, 2014

Cervus Equipment Corp. Q314 November 13, 2014

Computer Modelling Group Q215 November 12, 2014

CWC Energy Services Corp. Q314 November 13, 2014

DirectCash Payments Inc. Q314 November 14, 2014

Gamehost Inc. Q314 November 11, 2014

Input Capital Corp. Q215 November 28, 2014

K-Bro Linen Inc. Q314 November 13, 2014

MCAN Mortgage Corporation Q314 November 6, 2014

Mediagrif Interactive Technologies Inc. Q215 November 11, 2014

Northern Frontier Corp. Q314 November 13, 2014

People Corporation F14 November 24, 2014

Primary Energy Recycling Corp. Q314 TBD

Stella-Jones Inc. Q314 November 7, 2014

CompanyEarnings

ReleaseExpected Date


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AD has been slow on pulling the trigger on its next deal after a fairly active first half of the year. YTD AD has spent ~$54.00M, adding one new partner with an initial investment of US$29.2M in Kimco Holdings late Q2 for annual pre-tax distributions of US$4.6M (~$3.7M assuming 19.2% tax rate). The balance was used by AD to up the ante in three existing partners - Labstat ($6.0M in January), SMi ($7.5M in July), and Sequel (US$7.5M in August) which combined added ~$3.3M of annual revenue. The current run rate for partner revenue is ~$70.8M which will drive a payout ratio of 80.0% next year.

Partner update shows only a few head winds. In a recent walk through of the individual partners with Management the one stand out in terms of weak performance was Quetico. Quetico’s performance is typically counter cyclical, and with the strong economic growth in the US it has experienced less demand for its services. AD expects that the annual royalty reset for Quetico will meet the floor of -20%, moving the annual royalty from ~US$3.8M to US$3.0M. Quetico’s fall will be offset by increases at the likes of LifeMark, LMS, Solowave, Sequel, and steady performance for the balance of the names. Adding to this, Labstat is performing ahead of plan, and AD accrued $0.5M of additional royalties above the annual base of $3.2M in its Q2 reporting. When all the annual resets are tallied, royalties should be up 2-3% next year prior to any further investments.

New Deals Just Around the Corner? We are currently modeling AD to invest a total of $110.0M into partners for F14 (and each of the next three years), and we expect that AD will be able to make up the shortfall in the coming months. Based on the current basic share count of ~32.0M shares, the remaining $56.0M will add another ~$9.0M of annual distributions and increase the current cash from operating activities per share of $1.87 by $0.12 - $0.15 per share. With the Company’s payout ratio stabilized at the stated target of 80.0%, Management has indicated that the majority of the increase in cash from operating activities per share will be used to increase the current dividend of $1.50 p.a. The Company has an $85.1M revolving credit facility and was undrawn on the facility at the end of June with a cash balance of $11.6M.

Outlook. We are estimating Q314 revenue of $17.6M, EBITDA of $15.4M and EPS of $0.36.

Valuation. We derive our price target using DCF analysis with a 10.5X terminal multiple and 10.0% discount rate.

BUY Alaris Royalty Corp. (AD:TSX)

Recent Share Price $29.05 2011 2012 2013 2014E 2015E12-Month Price Target $36.00 Sales ($MM) $49.3 $32.1 $49.6 $73.0 $103.4Capital Return 23.9% Y/Y Growth 195.8% -34.8% 54.5% 47.2% 41.6%

Total Return 29.1% Normalized EBITDA ($MM) $16.1 $26.1 $43.9 $59.0 $89.7Market Cap ($MM) $929.5 Y/Y Growth 26.8% 62.1% 68.2% 34.3% 52.1%

S/O (mm) 32.0 Reported EPS (dil.) $1.97 $0.84 $1.09 $1.46 $1.75Current EV ($MM) $917.8 Y/Y Growth 264.8% -57.4% 29.8% 34.1% 19.8%Financial Year End Dec-31Dividend (Monthly) $0.125 P/Sales 6.4x 15.9x 16.5x 12.7x 9.0xDividend Yield 5.2% EV/Normalized EBITDA 19.8x 21.3x 19.4x 16.7x 10.9x2014E Payout Ratio 86.6% P/Normalized EBITDA 19.7x 19.5x 18.6x 15.8x 10.4x

P/E 9.1x 28.2x 27.4x 19.9x 16.6x

Debt ($MM) $6.5 $50.0 $44.5 $60.0 $60.0Debt/Normalized EBITDA 0.4x 1.9x 1.0x 1.0x 0.7xDebt/Equity 0.0x 0.2x 0.1x 0.1x 0.1x


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We are waiting on growth to change our view that the Company can outperform. AF recently confirmed the appointment of Anthony Pizzonia to CEO, who was previously acting in the role on an interim basis. We see this as a healthy move to take away some uncertainty. In his tenure as interim CEO he clearly showed his management style, which is one of more conservative spending on advertising. A bottom line focus has rewarded shareholders with better returns and offset the slower subscriber and topline revenue growth. The Company has a strong cash position and is not encumbered by any debt which allowed the Company to buy back shares, pay a special dividend of $0.60, as well as increase the annual dividend to $0.12 ($0.03 per quarter).

Outlook. We are estimating Q414 revenue of $13.2M, EBITDA of $3.6M and EPS of $0.15.

Valuation. Our target price for AF is determined by using a simple average of DCF analysis (9.0x terminal EBITDA multiple / 12% discount rate) and P/RMR (36.0x factor).

HOLD AlarmForce Industries Inc. (AF:TSX)

Recent Share Price $11.20 2011 2012 2013 2014E 2015E12-Month Price Target $12.10 Subscribers 124100 134100 141200 145473 151476Capital Return 8.0% Y/Y Growth 9.3% 8.1% 5.3% 3.0% 4.1%

Total Return 9.1% Sales ($MM) $40.9 $44.8 $49.1 $52.5 $53.3Market Cap ($MM) $131.1 Y/Y Growth 9.9% 9.7% 9.5% 7.0% 1.4%

S/O (mm) 11.7 EBITDA ($MM) $10.0 $6.2 $12.8 $15.3 $15.5Current EV ($MM) $127.8 Y/Y Growth -7.6% -37.6% 104.5% 19.9% 1.2%

Financial Year End Oct-31 EPS (dil.) $0.27 $0.09 $0.45 $0.63 $0.66Dividend (Quarterly) $0.03 Y/Y Growth -30.8% -64.9% 373.8% 40.1% 4.7%

Dividend Yield 1.1%2014E Payout Ratio 76.2% P/Sales 3.0x 3.1x 2.6x 2.5x 2.5x

EV/EBITDA 11.7x 21.6x 9.7x 8.5x 7.9xP/EBITDA 12.1x 22.0x 9.8x 8.6x 8.5xP/E 38.3x 123.9x 23.9x 17.8x 17.0x

Debt ($MM) $0.0 $0.0 $0.0 $0.0 $0.0Debt/EBITDA 0.0x 0.0x 0.0x 0.0x 0.0xDebt/Equity 0.0x 0.0x 0.0x 0.0x 0.0x


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BDI is one of two go-to names when investors ask for exposure to the energy sector, given the contractual nature of revenues. Unfortunately, peer challenges first (HNL, Civeo) followed by accelerated concerns for a slowdown in oil sands development and the potential of BC missing its chance for LNG development, have pulled the share price back from its highs. This is overshadowing near term earnings momentum. The stock has imbedded growth over the next six quarters from an active cap ex cycle over the last two years. We refer you to our update of September 30th, 2014 for additional commentary.

Outlook. We are estimating Q314 revenue of $90.3M, EBITDA of $33.4M and EPS of $0.27. We are making adjustments to our model from our recent piece that reduce forward growth expectations for F16 and beyond to weigh in the weaker energy market, and this impacts our DCF output. We are reducing spending to ~$40.0M of new capital per year for F15 and beyond. BDI is well positioned should LNG go ahead and this would be a significant catalyst for the shares.

Valuation. The stock is down further from our recent update, and at these prices the stock looks attractive against historical and peer multiples. Our target price for BDI is determined by using a simple average of DCF analysis (6.5x terminal EBITDA multiple / 12.5% discount rate) and a selected F15E EV/EBITDA peer group multiple. In terms of peers, Civeo is the most direct peer, and we are using its 2015 EV/EBITDA multiple of 6.5X for BDI. We believe that BDI deserves to trade at premium to HNL and ATCO given the difference in the business models.

| BLACK DIAMOND GROUP LIMITED | PEER GROUP

Source: Acumen Capital Partners, Bloomberg, Figures subject to rounding

Shares/Units Market

Company Ticker FD Cap EV 2014E 2015E 2014E 2015E

Horizon North Logistics Inc. ca:hnl 110.3m $505.2m $633.2m $106.9m $145.9m 5.9x 4.3x

Clean Harbors us:clh 60.6m $2804.0m $3921.9m $539.6m $595.2m 7.3x 6.6x

Civeo us:cveo 106.7m $1323.0m $1812.5m $313.3m $279.3m 5.8x 6.5x

ATCO ca:aco/x 101.6m $4600.7m $10958.7m $1874.0m $2075.0m 5.8x 5.3x

Mean Multiples 6.2x 5.7x

EBITDA EV/EBITDA

BUY Black Diamond Group Ltd. (BDI:TSX)

Recent Share Price $20.85 2011 2012 2013 2014E 2015E12-Month Price Target $27.40 Sales ($MM) $241.8 $264.3 $347.1 $398.7 $437.0Capital Return 31.4% Y/Y Growth 73.0% 9.3% 31.3% 14.9% 9.6%

Total Return 36.0% EBITDA ($MM) $94.1 $112.1 $141.2 $148.9 $177.1Market Cap ($MM) $894.3 Y/Y Growth 86.8% 19.2% 26.0% 5.4% 19.0%

S/O (mm) 42.9 EPS (dil.) $1.12 $1.18 $1.26 $1.28 $1.70Current EV ($MM) $1,002.9 Y/Y Growth 107.5% 5.7% 6.4% 1.9% 32.1%Financial Year End Dec-31Dividend (Monthly) $0.08 P/Sales 2.8x 3.1x 3.6x 2.2x 2.0xDividend Yield 4.6% EV/EBITDA 7.8x 8.1x 10.1x 6.9x 5.4x2014E Payout Ratio 30.6% P/EBITDA 7.2x 7.2x 9.0x 6.0x 5.0x

P/E 16.5x 17.1x 23.8x 16.2x 12.3x


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The Company recently confirmed its first receipt of Cold Lake blend following the connection of the Cold Lake pipeline system, a final step to start transloading oil into rail cars at Bruderheim. We refer you to our update of September 10th, 2014 for additional commentary.

Outlook. We are not expecting big things in terms of financial performance for Q314 given the shutdown of Bruderheim during the summer to complete construction of the facility. Q414 should be a turning point for the Company should they decide to hold on to Bruderheim. The sale of Bruderheim is in the cards according to comments by Management, a step that would clean up a leveraged balance sheet and allow it to focus on its core chemical business and take away any risk of a dividend cut. We are estimating Q314 revenue of $116.0M, cash operating profit of $21.2M, and EPS of $0.01.

Valuation. Our target price for CUS is determined by using a weighted average of DCF analysis (60% weighting, employing an 8.5x terminal EBITDA multiple and 11.5% discount rate) and F15E EV/EBITDA peer group multiple (40% weighting).

| CANEXUS CORPORATION | PEER GROUP


Shares/Units Market


Chemical Manufacturing (50%)

Chemtrade Logistics Income Fund ca:che.un 60.0m $1158.1m $2201.3m $219.8m $252.4m 10.0x 8.7x

Methanex Corporation ca:mx 94.1m $5905.9m $6408.0m $722.8m $922.1m 8.9x 6.9x

O&G Midstream (50%)

Keyera Corporation ca:key 83.9m $7413.1m $8312.1m $521.9m $616.5m 15.9x 13.5x

Gibson Energy Inc. ca:gei 124.0m $3822.0m $4587.1m $447.5m $502.8m 10.3x 9.1x


EBITDA EV/EBITDA

SPECULATIVE BUY Canexus Corporation (CUS:TSX)

Recent Share Price $4.03 2011 2012 2013 2014E 2015E12-Month Price Target $5.20 Sales ($MM) $497.7 $582.4 $553.0 $551.4 $631.2Capital Return 29.0% Y/Y Growth 8.8% 17.0% -5.1% -0.3% 14.5%

Total Return 39.0% EBITDA ($MM) $124.1 $129.6 $89.2 $102.4 $139.0Market Cap ($MM) $738.3 Y/Y Growth 80.3% 4.4% -31.1% 14.8% 35.7%

S/O (mm) 183.2 EPS (dil.) $0.36 $0.31 $0.06 $0.08 $0.25Current EV ($MM) $1,252.2 Y/Y Growth 338.3% -13.9% -80.6% 33.4% 214.9%Financial Year End Dec-31Dividend (Quarterly) $0.10 P/Sales 1.6x 1.8x 2.1x 1.3x 1.2xDividend Yield 9.9% EV/EBITDA 9.9x 11.1x 19.0x 12.9x 9.0x2014E Payout Ratio 123.5% P/EBITDA 6.5x 8.0x 13.0x 7.2x 5.3x

P/E 17.9x 27.4x 119.3x 50.3x 16.0x





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CVL continues to use acquisitions to complement organic growth. CVL announced two acquisitions during Q3, Peterbilt Ontario ($25.5M closed early August) and Evergreen Equipment Ltd. ("Evergreen") which owns four John Deere dealerships located in Alberta (estimated at $20.0M closed October 16th). Both deals were financed with the Company’s balance sheet, and we estimate that both transactions were done at ~4X EBITDA. We refer you to our reports of July 3rd, 2014 and September 19th, 2014.

Outlook. A reasonable Q114 was offset by a slower Q214. Reduction in AG equipment sales and higher SG&A are the current drags on the business. CVL is evolving to increase parts and services revenue which has driven up costs in the near term. Hiring, training, and absorption of new employees has created some near term overhead that should eventually translate to more revenue generation. We are estimating Q314 revenue of $284.3M, EBITDA of $15.8M, and EPS of $0.51.

Valuation. Our target price for CVL is determined by using a simple average of DCF analysis (8.0x terminal EBITDA multiple / 12.5% discount rate) and F15E EV/EBITDA peer group multiple. Our target price reduces with the update in the peer group.

| CERVUS EQUIPMENT CORPORATION | PEER GROUP


Shares/Units Market


Finning International Inc. ca:ftt 172.3m $4720.0m $6083.8m $768.1m $837.4m 7.9x 7.3x

Rocky Mountain Dealerships Inc. ca:rme 19.3m $200.9m $237.2m $41.5m $46.2m 5.7x 5.1x

Tormont Industries Inc. ca:tih 77.1m $1946.1m $2052.3m $239.0m $257.1m 8.6x 8.0x

Strongco Corp. ca:sqp 13.2m $41.5m $337.4m $42.6m $50.9m 7.9x 6.6x

Wajax Income Fund ca:wjx 16.8m $595.8m $814.0m $96.4m $109.1m 8.4x 7.5x


EBITDA EV/EBITDA

BUY Cervus Equipment Corporation (CVL:TSX)

Recent Share Price $17.87 2011 2012 2013 2014E 2015E12-Month Price Target $23.70 Sales ($MM) $559.6 $702.4 $861.1 $980.4 $1,198.8Capital Return 32.6% Y/Y Growth 19.3% 25.5% 22.6% 13.8% 22.3%


S/O (mm) 15.2 EPS (dil.) $1.22 $1.52 $1.48 $1.50 $2.12Current EV ($MM) $340.8 Y/Y Growth 54.4% 24.9% -2.8% 1.4% 41.4%Financial Year End Dec-31Dividend (Quarterly) $0.2075 P/Sales 0.4x 0.4x 0.4x 0.3x 0.2xDividend Yield 4.6% EV/EBITDA 6.5x 7.6x 8.5x 6.9x 5.6x2014E Payout Ratio 24.9% P/EBITDA 6.2x 6.2x 7.2x 5.2x 4.1x

P/E 12.1x 12.3x 16.2x 11.9x 8.4x






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CMG is our other go-to name for an energy related stock. Investors appear to be extrapolating a potential slowdown in oil sands and other E&P activities into head winds for CMG. History has shown that the Company’s financial performance is not directly correlated with oil prices. Even if energy demand is down, in today’s environment replacing barrels comes at higher exploration and development costs. In this scenario CMG’s software is becoming even more valuable.

Outlook. The immediate catalyst for CMG is the final release of DRMS this fall with commercial availability next year. Management is also expecting increasing use of its software for non-conventional resource plays such as shale gas which will help the Company maintain double digit growth of annuity/maintenance licensing. Looking at the numbers, by the end of the year CMG is on track to have 100 customers using its software for unconventional energy plays, up from 30 in 2010. We are estimating Q215 revenue of $19.3M, EBITDA of $9.9M and EPS of $0.09.

Valuation. With the stock at current levels, the stock has limited downside to trade at equivalent multiples to peers with less recurring revenue. Our target price for CMG is determined by using a simple average of DCF analysis (17.5x terminal EBITDA multiple (previously 18.5X) / 12.5% discount rate) and 34X (previously 40X) (18 month average) our 12 month forward EPS estimate.

| COMPUTER MODELLING GROUP | PEER GROUP


Shares/Units Market

Company Ticker FD Cap EV 2015e 2016e 2015e 2016e

The Descartes Systems Group Inc. ca:dsg 75.3m $1104.8m $963.4m $0.54 $0.61 27.0x 24.1x

Avigilon Corporation ca:avo 46.6m $679.6m $523.7m $1.07 $1.31 13.6x 11.1x

BSM Technologies ca:gps 47.6m $66.2m $53.2m $0.04 $0.07 39.7x 20.1x

Solium Capital ca:sum 47.4m $387.5m $338.1m $0.27 $0.30 29.9x 27.3x

Mean Multiple 27.5x 20.7x

EPS P/E

BUY Computer Modelling Group Ltd. (CMG:TSX)



S/O (mm) 79.0 EPS (dil.) $0.31 $0.32 $0.35 $0.35 $0.39Current EV ($MM) $777.7 Y/Y Growth -34.1% 4.0% 8.8% 0.0% 12.1%Financial Year End Mar-31Dividend (Quarterly) $0.10 P/Sales 4.9x 6.0x 7.8x 10.7x 10.0xDividend Yield 3.7% EV/EBITDA 7.5x 9.8x 13.2x 19.2x 17.2x2015E Payout Ratio 98.2% P/EBITDA 9.2x 11.4x 15.1x 21.1x 19.1x

P/E 25.8x 33.0x 41.9x 31.1x 27.7x



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The Company has done all the right things to position itself and now the next leg up for energy stocks appears to be on hold.

Outlook. The Company recently provided us a fairly positive outlook for Q414 and Q115 but like many others, the future is cloudy. On a positive note the Company has a strong balance sheet and pays an attractive dividend. See our September 15th, 2014 update. We are estimating Q314 revenue of $45.8M, EBITDA of $13.7M, and EPS of $0.02.

Valuation. The stock price has pulled back with the industry multiples. Our target price for CWC is determined by using a simple average of DCF analysis (7.5x terminal EBITDA multiple / 15% discount rate) and F15E EV/EBITDA peer group multiple. Our revision relates to the reduction in the peer multiple.

| CWC ENERGY SERVICES CORP | PEER GROUP


Shares/Units Market


Phoenix Technology Service Corp PHX 35m $427m $523m $76.2m $92.4m 6.9x 5.7x

Cathedral Energy Services Ltd CET 36m $126m $184m $36.2m $44.2m 5.1x 4.2x

Trican Well Service Ltd TCW 150m $1532m $2147m $245.6m $449.1m 8.7x 4.8x

Precision Dril l ing Corporation PD 293m $2866m $4006m $810.4m $991.9m 4.9x 4.0x

Western Energy Services Corp. WRG 75m $564m $759m $172.7m $193.5m 4.4x 3.9x

Ensign Energy Services ESI 153m $2047m $2654m $538.5m $628.5m 4.9x 4.2x

Savanna Energy Services Corp. SVY 89m $585m $816m $161.0m $198.8m 5.1x 4.1x

Total Energy Services Inc. TOT 31m $592m $622m $112.9m $135.6m 5.5x 4.6x

Trinidad Drill ing Ltd. TDG 138m $998m $1205m $258.0m $329.9m 4.7x 3.7x

Essential Energy Services Ltd. ESN 126m $254m $294m $70.8m $91.5m 4.1x 3.2x


EV/EBITDAEBITDA

SPECULATIVE BUY CWC Energy Services Corp. (CWC:TSX-V)


Total Return 58.1% EBITDA ($MM) $28.5 $25.0 $26.2 $40.7 $51.5Market Cap ($MM) $200.2 Y/Y Growth 119.2% -12.1% 4.5% 55.5% 26.5%

S/O (mm) 270.5 EPS $0.08 $0.03 $0.03 $0.07 $0.09Current EV ($MM) $244.8 Y/Y Growth 442.0% -62.4% 1.8% 123.5% 35.6%Financial Year End Dec-31Dividend (Quarterly) $0.0175 P/Sales 0.9x 1.0x 1.2x 1.3x 1.0xDividend Yield 9.5% EV/EBITDA 5.0x 6.3x 6.7x 5.8x 4.1x2014E Payout Ratio 26.2% P/EBITDA 3.3x 4.5x 5.1x 4.9x 3.9x

P/E 7.4x 23.4x 27.2x 10.9x 8.0x





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The Company continues to trade at a significant discount to its peers with the street still questioning Australia’s performance potential and penalizing the Company for its association with Cash Store Financial. Recent news that Money Mart is buying CSF highlights DCI has been successful in keeping themselves involved with the new buyer, at least in the short-term. The stock potentially provides the biggest gains next year should it overcome some of the negative overtone.

Outlook. DCI exited Q214 with net debt of $195.9M, down by $41.8M from the beginning of the year which is well within debt covenants. The Company took advantage of this and increased its annual dividend by 4% to $1.44. For Q314 we are estimating revenue of $71.5M and EBITDA of $19.0M which is slightly up from Q214. We are expecting the continuation of performance may finally start to peak investor’s interests in the shares.

Valuation. Our target price for DCI is determined by using a simple average of DCF analysis (7.5x terminal EBITDA multiple / 12.5% discount rate) and 85% of the F15E EV/EBITDA peer group multiple. The peer multiples have not changed since our recent update.

| DIRECTCASH PAYMENTS INC.| PEER GROUP


Shares/Units Market

Company Ticker FD Cap 2014E 2015E 2014E 2015E

Global Payments us:gpn 67.6m $4858m $6335m $595.6m $636.9m 10.6x 9.9x

Cardtronics us:catm 44.5m $1576m $1989m $240.5m $272.8m 8.3x 7.3x


EV

EV/EBITDAEBITDA

BUY DirectCash Payments Inc. (DCI:TSX)



S/O (mm) 17.6 EPS (dil.) $1.47 $0.46 $0.00 $0.05 $0.25Current EV ($MM) $456.5 Y/Y Growth 298.0% -68.7% -99.8% nmf 404.1%Financial Year End Dec-31Dividend (Monthly) $0.12 P/Sales 2.5x 1.8x 1.3x 1.0x 0.9xDividend Yield 9.1% EV/EBITDA 7.4x 9.3x 7.4x 6.0x 5.0x2014E Payout Ratio 54.1% P/EBITDA 7.5x 6.2x 4.5x 3.6x 3.3x



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Gamehost is a name we wanted to highlight that is likely to have some midterm catalysts.

Industry Update. Gaming revenues in Alberta are just recently back to pre 2007 levels. A five year moratorium on granting new licenses put in place in 2010 is up for renewal in mid 2015, and Management expects this to be extended for another 5 years. We also expect the government to continue investing in the current gaming operators given its dependence on its share of the proceeds, which are redirected into healthcare and other social initiatives.

Potential Catalysts. After a successful upgrade in Grand Prairie, Management has now turned its attention on Fort McMurray. The Company has started working with its landlord with the goal of replacing the existing facility and potentially doubling the floor space, to allow for additional gaming activities and F&B choices. The Company estimates that its upfront investment would be ~$3.0M - $5.0M of soft costs (landlord would build and lease to GH) with the potential of adding $3.0 - $4.0 of EBITDA p.a. We have not modelled for this until we have clearer direction.

Outlook. We expect Q314 to be similar to Q2 results and are modelling revenue of $20.9M, EBITDA of $9.3M, and EPS of $0.23.

Valuation. Our target price for GH is determined by using a simple average of DCF analysis (9.0x terminal EBITDA multiple / 12.5% discount rate) and historical EV/EBITDA analysis employing an 11.4x multiple.

BUY Gamehost Inc. (TSX:GH)



S/O (mm) 23.8 EPS $0.70 $0.92 $0.87 $1.05 $1.15Current EV ($MM) $413.2 Y/Y Growth 6.4% 31.1% -5.4% 20.6% 9.5%

Financial Year End Dec-31Dividend (Monthly) $0.0733 P/Sales 3.3x 4.1x 4.8x 4.6x 4.3xDividend Yield 5.4% EV/EBITDA 9.6x 10.2x 11.6x 11.1x 9.8x2014E Payout Ratio 71.0% P/EBITDA 7.8x 9.3x 10.9x 10.6x 9.6x

P/E 16.0x 13.8x 17.1x 15.6x 14.3x



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Input is in the early days of its intriguing business model. The Company has $42.9M of capital invested with 21 farm partners and has ~$60.0M available for further deployment.

Outlook. INP’s next financial report (Q215) will still be a slow quarter. We already know that streaming revenue in Q215 is $1.9M with the revenue line driven by outstanding tonnes from the 2013 crop season. Input also only added one new streaming contract in the quarter, investing ~$0.2M with a farmer in Saskatchewan. With much of the 2014 crop harvested the Company can focus on deploying capital and with success we expect the share to respond. We are estimating $28.5M of total deployment for this year and next year. We are estimating Q215 revenue of $1.9M, adjusted EBITDA of $0.9M, and EPS of $0.00.

Valuation. Our target price for INP is determined by using a simple average of DCF analysis (16.0x terminal EBITDA multiple / 12.5% discount rate) and 90% of the F16E EV/EBITDA peer group multiple.

| INPUT CAPITAL CORP| PEER GROUP


Shares/Units Market


Sandstorm Gold ca:ssl 117.5m $587.6m $476.2m $44.4m $48.3m 10.7x 9.9x

Franco-Nevada Corp. ca:fnv 155.9m $9586.6m $8870.6m $425.5m $441.5m 20.8x 20.1x

Silver Wheaton Corp. ca:slw 364.2m $8095.2m $8955.7m $570.1m $656.0m 15.7x 13.7x

Royal Gold Inc. ca:rgl 64.8m $5016.3m $4659.0m $277.1m $312.1m 16.8x 14.9x


EV/EBITDAEBITDA

BUY Input Capital Corp. (INP:TSX-V)

Recent Share Price $2.05 2012 2013 2014 2015E 2016E

12-Month Price Target $4.10 Sales ($MM) n/a n/a $5.1 $29.2 $34.7

Total Return 100.0% Y/Y Growth n/a n/a n/a 476.2% 18.8%

Market Cap ($MM) $167.0 Adj. EBITDA ($MM) n/a n/a $0.4 $19.4 $22.4

S/O (mm) 81.5 Y/Y Growth n/a n/a n/a nmf 15.8%

Current EV ($MM) $101.4 EPS (dil.) n/a n/a -$0.09 $0.11 $0.09

Financial Year End Mar-31 Y/Y Growth n/a n/a n/a 233.9% -24.1%

P/Sales n/a n/a 32.9x 5.7x 4.8x

EV/ Adj. EBITDA n/a n/a nmf 5.4x 5.7x

P/E n/a n/a nmf 17.8x 23.5x

Debt ($MM) n/a n/a $0.0 $0.0 $0.0Debt/ Adj. EBITDA n/a n/a 0.0x 0.0x 0.0x

Debt/Equity n/a n/a 0.0x 0.0x 0.0x


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We recently spoke with Management to get an update on current activities and potential future catalysts. The stock is setting up for the next upward leg with new business opportunities that could surface as early as the next 6 -12 months.

Canadian Healthcare Opportunities. Management talked us through the Canadian Healthcare market which confirmed KBL has several opportunities that are likely potential catalysts for stock appreciation in the medium to long term.

British Columbia - K-BRO has been fairly successful in BC and has shown its willingness to invest capital. Looking at the key regions;

Vancouver Island – no immediate opportunities identified but KBL continues to monitor. Its facility in Victoria has

capacity to take on additional volumes.

Vancouver and region – 90% of the healthcare laundry is currently outsourced so there are limited lump sum

volumes to pick up.

Interior BC – Interior Health represents 23 hospitals and other facilities in the southern interior of BC. The region

is currently looking to consolidate its laundry requirements, and a decision is likely to be made over the next 6 –

12 months. Management estimates this to be similar in scope to Saskatchewan ($15.0M of annual revenues).

Alberta - K-Bro has excess capacity at both its Edmonton and Calgary facility. Management estimates there is ~$15.0M of annual revenue potential from other health care facilities in AB that could be transferred to these facilities.

Saskatchewan - The project continues to progress, and Management expects to firm up the budget soon. The current capital estimate is ~$25.0M and will be funded from cash-flow and debt. When completed this should add $15.0 - $20M of revenue annually.

Manitoba - Outsourcing of laundry is not being considered by the government.

Ontario - In the medium term (two – three years) it would not be unreasonable to expect K-Bro to build a new facility. The government laundry facility (Booth –Centennial) continues to have their challenges which include a recent change in management. The facility could be a potential acquisition opportunity but it is not set up for efficiencies and is imbedded with an expensive collective bargaining agreement. At the right price it might be considered but its contribution would take longer to be rationalized and would be difficult to achieve attractive operating metrics in comparison to a new facility. Outside Toronto, cities like Hamilton and London are longer term opportunities (~ five years).

Quebec - KBL still has capacity in its facility, and opportunities exist in Montreal to take on additional hospitality clients. A new government central laundry facility in Quebec City was under consideration but it was stopped, resurfacing the opportunity for a private laundry provider like KBL to set up in the market. The time line for this opportunity is unknown.

Maritimes – Progress for development in this market remains slow. In the last week Nova Scotia’s Liberal majority government passed legislation that will restructure the health-care system. The high level review to improve frontline health care will push out the review of support services like laundry. A new liberal government in New Brunswick pushes any opportunities out further.

Near Term Catalysts. For HI14 KBL has benefited from price increases, organic growth, and additional healthcare volumes from the Saskatoon Health Region. We expect increased volumes and an uptick in pricing as well as further

BUY K-Bro Linen Inc. (KBL:TSX)



S/O (mm) 7.1 EPS (dil.) $1.14 $1.59 $1.47 $1.71 $1.77Current EV ($MM) $306.0 Y/Y Growth 14.7% 40.4% -7.8% 16.1% 3.9%Financial Year End Dec-31Dividend (Monthly) $0.10 P/Sales 1.3x 1.6x 2.1x 2.1x 1.9xDividend Yield 3.0% EV/EBITDA 8.1x 8.5x 12.8x 11.3x 10.4x2014E Payout Ratio 44.2% P/EBITDA 7.8x 8.2x 12.0x 10.5x 9.4x

P/E 19.6x 18.1x 26.9x 23.3x 22.5x



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operational improvements for the new Edmonton facility to drive good year over year comps for Q3. Medium to longer term catalysts include the completion of the new Saskatchewan facility in H215 and new business, should KBL win some of the mandates noted above.

Financial Impact. KBL’s historical EBITDA margin is ~20.0% so the Alberta and BC opportunities could provide $6.0 - $7.0M of incremental EBITDA. Depending on timing, we assume that KBL could finance the construction of a new facility for Interior BC using debt and operating cash flow. KBL reported LTD of $22.6M at the end of Q214 leaving capacity of ~$16.8M on its $40.0M facility interest only facility (Prime + 0% =3.0% at the end of Q214).

Distributable Cash – We are currently forecasting distributable cash of $19.0M for F14 and $21.5M for F15 (43% and 38% payout ratio respectively) without consideration of the new business. Depending on timing of new initiatives we believe KBL generates enough FCF and has enough debt capacity to finance the smaller opportunities with its balance sheet.

| K-BRO LINEN INC | KBL FREE CASH FLOW

Source: Acumen Capital Partners, Figures subject to rounding

Outlook. For Q3 we are modelling revenue of $36.6M, EBITDA of $7.7M and EPS of $0.51.

Valuation. Our target price for KBL is determined using a simple average of DCF analysis (10.0x terminal EBITDA multiple / 12% discount rate) and F15E EV/EBITDA peer group multiple. We upgrading KBL to a BUY as we believe there is enough upside potential to justify averaging into the stock.

| K-BRO LINEN INC | PEER GROUP


Free Cash Flow F14E F15e

EBITDA $26.9m $30.0m

Less: Interest Expense -$0.8m -$1.2m

Less: Taxes -$5.2m -$4.8m

Less: Working Capital -$2.2m $0.8m

Operating Cash Flow $18.8m $24.9m

Less: Maintenance Capex -$2.5m -$2.5m

Less: Dividends -$8.4m -$8.6m

Free Cash Flow $7.9m $13.8m

Shares/Units Market


Cintas Corp us:CTAS 117.0m $8004.9m $8723.4m $843.6m $890.6m 10.3x 9.8x

G&K Services Inc us: GKSR 19.9m $1177.2m $1407.1m $143.6m $158.0m 9.8x 8.9x


EBITDA EV/EBITDA


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Results for H114 trended as expected with the integration of Xceed helping MKP build its uninsured mortgage presence. Moving forward we expect the MBS program to play a bigger role in performance and be a further catalyst for the stock.

Outlook. MCAN was selective in its origination activities in H114 to keep its credit quality trends in check. We expect the good performance to continue given the strong focus on loan quality and the availability of capital.

Valuation. Our target price for MCAN is determined using a simple average of DCF analysis (12.0x terminal EBITDA multiple / 12.5% discount rate) and F15E EV/EBITDA peer group multiple.

| MCAN MORTGAGE CORPORATION | PEER GROUP


Shares/Units Market

Company Ticker FD Cap EV 2014E 2015E 2014E 2015E 2014E 2015E

Home Capital Group Inc. HCG:CN 70m $3370.1m $7542.0m $4.20 $4.80 2.3x 1.9x 11.4x 10.0x

Canadian Western Bank CWB:CN 80m $2927.6m $3086.1m $2.70 $3.06 1.9x 1.7x 13.5x 11.9x

Laurentian Bank LB:CN 29m $1356.5m $6728.8m $5.33 $5.70 1.0x 0.9x 8.8x 8.3x

Mean Multiple 1.7x 1.5x 11.3x 10.1x

P/BV P/EEPS

BUY MCAN Mortgage Corporation (MKP:TSX)

Recent Share Price $14.09 2011 2012 2013 2014E 2015E12-Month Price Target $16.20 Net Corporate Income ($MM)$25.7 $31.1 $44.3 $40.3 $42.6Capital Return 15.0% Y/Y Growth -6.3% 21.4% 42.3% -9.2% 5.9%

Total Return 22.9% Net Securitized Income ($MM)$6.1 -$5.9 -$3.1 -$0.4 $3.4Market Cap ($MM) $291.3 Y/Y Growth -43.3% -197.5% 47.9% 88.3% nmf

S/O (mm) 20.7 Net Investment Income ($MM)$31.7 $25.2 $41.2 $39.9 $46.0Financial Year End Dec-31 Y/Y Growth -16.7% -20.4% 63.3% -3.2% 15.3%

Dividend (Quarterly) $0.28 Operating Income ($MM)$24.8 $16.2 $30.0 $26.2 $28.2Dividend Yield 7.9% Y/Y Growth -22.3% -34.7% 84.5% -12.6% 7.6%

EPS (dil.) $1.68 $1.22 $1.54 $1.26 $1.37Y/Y Growth -9.0% -27.2% 26.0% -17.9% 8.4%

Corporate Mortgages ($MM)$640.4 $739.8 $861.6 $945.0 $975.0BV/Share $9.40 $9.49 $10.28 $11.23 $11.78P/BV 1.5x 1.5x 1.4x 1.3x 1.2x


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The shares have been range bound with investors still waiting for better top line performance from some of the Company’s recent acquisitions. We have seen some good profit performance, as expected, given Management’s track record of rightsizing overheads, but revenue growth has been limited to low single digits. A possible acquisition announcement could be the next inflection point for the stock. The Company has demonstrated its ability to manage its balance sheet, and we estimate it has roughly $30.0M of capacity on its $60.0M revolving credit facility plus access to an accordion loan of $40.0M.

Outlook. We expect MDF to continue to show progress integrating recent acquisitions. For Q215, we are expecting revenue of $18.1M, EBITDA of $6.9M, and EPS of $0.21.

Valuation. Our target price for MDF is determined using a simple average of DCF analysis (12.0x terminal EBITDA multiple / 12.5% discount rate) and F16E EV/EBITDA peer group multiple.

| MEDIAGRIF INTERACTIVE TECHNOLOGIES | PEER GROUP


Shares/Units Market


Constellation Software Inc. ca:csu 21.2m $5827.7m $5996.9m $398.7m $485.5m 15.0x 12.4x

The Descartes Systems Group Inc. ca:dsg 75.3m $1104.8m $963.4m $51.3m $59.2m 18.8x 16.3x

Open Text Corp ca:otc 121.8m $7250.7m $8142.2m $652.1m $696.3m 12.5x 11.7x

Equinix Inc. us:eqix 53.2m $10226.0m $13546.5m $1270.0m $1411.2m 10.7x 9.6x

InterNAP Network Services us:inap 54.4m $370.4m $697.9m $84.2m $97.5m 8.3x 7.2x

InterXion Holdings NV us:inxn 68.9m $1732.8m $2111.7m $169.3m $185.7m 12.5x 11.4x

Rackspace Hostings Inc. us:rax 143.0m $4961.2m $4698.9m $682.6m $800.8m 6.9x 5.9x

Tyler Technologies Inc. us:tyl 32.8m $3127.6m $3038.7m $145.2m na 20.9x na

Solium Capital Inc. ca:sum 47.4m $387.5m $338.1m $25.8m $29.8m 13.1x 11.3x


EBITDA EV/EBITDA

BUY Mediagrif Interactive Technologies Inc. (MDF:TSX)



S/O (mm) 15.8 EPS (dil.) $0.69 $0.97 $0.80 $0.85 $1.06Current EV ($MM) $312.2 Y/Y Growth 18.9% 40.2% -17.0% 6.2% 24.5%Financial Year End Mar-31Dividend (Quarterly) $0.10 P/Sales 4.4x 4.3x 4.4x 3.9x 3.6xDividend Yield 2.2% EV/EBITDA 15.5x 9.9x 13.1x 10.9x 9.0x2015E Payout Ratio 31.0% P/EBITDA 13.7x 10.5x 11.9x 10.2x 9.0x

P/E 25.0x 18.9x 22.8x 21.1x 17.0x



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Market conditions for FFF appear to be challenging, and the stock has taken it hard. We are looking for reasons to be positive but stay cautious given near term head wind risks. The Company is under a lot of scrutiny given a number of missteps this year, and the recent postponement of a project by Statoil added fuel to concerns.

Outlook. Q314 results will be another transition quarter given the timing of an equity financings late in the quarter and only one month of contribution from Central Water. Investors should be most focused on the outlook provided by Management as Q414 results are likely going to be the financial information that investors need to understand the business. A potential catalyst could be a significant contract win to keep its yellow iron rolling. For Q314, we are expecting revenue of $17.9M, EBITDA of $4.0M, and a loss of $0.02 per share.

Valuation. Our target price for FFF is determined using a simple average of DCF analysis (6.5x terminal EBITDA multiple / 13% discount rate) and F15E EV/EBITDA peer group multiple. We see a small revision in our target price with the updated peer group information.

| NORTHERN FRONTIER CORP| PEER GROUP


Shares/Units Market


Mullen Group Ltd. ca:mtl 91.6m $2126.1m $2458.3m $311.7m $339.3m 7.9x 7.2x

Trimac Transportation Ltd. ca:tma 28.1m $179.8m $286.3m $51.7m $56.7m 5.5x 5.0x

Contrans Group Inc. ca:css 32.8m $486.5m $549.1m $82.6m $84.4m 6.6x 6.5x

North American Energy Partners Inc. ca:noa 35.4m $223.8m $342.3m $57.3m $71.7m 6.0x 4.8x

Basic Energy Services Inc. us:bas 43.2m $607.4m $1387.8m $323.0m $405.5m 4.3x 3.4x

Newpark Resources Inc. us:nr 83.7m $892.7m $1029.2m $154.6m $193.5m 6.7x 5.3x

Key Energy Services Inc. us:keg 153.5m $588.0m $1283.3m $178.6m $309.2m 7.2x 4.2x

Exterran Holdings Inc. us:exh 67.0m $2424.1m $4222.8m $648.3m $749.3m 6.5x 5.6x

Horizon North Logistics Inc. ca:hnl 110.3m $505.2m $633.2m $106.9m $145.9m 5.9x 4.3x


EBITDA

TRUCKING

ENERGY SERVICES

EV/EBITDA

SPECULATIVE BUY Northern Frontier Corp. (FFF:TSX-V)

Current Share Price $0.95 2011 2012 2013* 2014E 2015E

12-Month Price Target $2.00 Sales ($MM) nmf nmf $15.0 $72.5 $85.0

Capital Return 110.5% Y/Y Growth nmf nmf n/a 382.6% 17.3%

Total Return 121.1% EBITDA ($MM) nmf nmf $1.9 $15.2 $18.3

Market Cap ($MM) $22.1 Y/Y Growth nmf nmf n/a nmf 20.3%

S/O (mm) 23.2 EPS (dil.) nmf nmf -$0.74 -$0.03 $0.02

Current EV ($MM) $75.9 Y/Y Growth nmf nmf n/a 96.2% 172.5%

Financial Year End Dec-31

Dividend (Quarterly) $0.025 P/Sales nmf nmf 3.6x 0.3x 0.3x

Dividend Yield 10.5% EV/EBITDA nmf nmf 45.9x 4.1x 2.8x

2014E Payout Ratio 19.9% P/EBITDA nmf nmf 28.8x 1.4x 1.2x

P/E nmf nmf nmf nmf 47.2x

Debt ($MM) nmf nmf $35.5 $48.3 $48.0

Debt/EBITDA nmf nmf 19.0x 3.2x 2.6x

* 13 months ended Dec 31, 2013 as reported Debt/Equity nmf nmf 1.1x 0.9x 0.8x


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Acquired and organic growth will help PEO report record results for F14. PEO has a September year end and results are scheduled to be published November 24th. A private placement completed in Q3 for net proceeds of ~$9.6M, coupled with recent corporate and board appointments are evidence that they are setting themselves up for aggressive future growth.

Multiple drivers of growth. PEO has demonstrated its willingness to grow the business. Targeted initiatives include;

Additional benefit consultants

New clients origination

Additional revenue from existing clients

Broader service offering

Acquisitions

YTD Results. PEO reported nine-month revenue of $32.5M and adjusted EBITDA of $6.1M, up 36.7% and 79.5% respectively. Y/y revenue growth consisted of; Organic - $2.5M (representing organic growth of 10.4%) and $6.2M from prior year acquisitions.

A History of Acquisitions. Since we picked up coverage earlier this year PEO has completed two small acquisitions TY. We expect strong financial results and the potential of further acquisitions to be catalysts for the shares in the near to medium term. Its strategy of acquiring only a portion of the targets EBITDA at the start is proving to be a valuable tool to make sure the acquisition meets expectations.

Outlook. For Q414, we are expecting revenue of $12.1M, EBITDA of $2.1M, and EPS of $0.02.

Valuation. PEO is a strong generator of cash. Our target price for PEO is determined using a simple average of DCF analysis (9.0x terminal EBITDA multiple / 12.5% discount rate) and F15E EV/EBITDA peer group multiple.

| PEOPLE CORPORATION| PEER GROUP


Shares/Units Market


Morneau Shepell Inc. ca:msi 48.0m $765.9m $1064.1m $100.2m $107.6m 10.6x 9.9x

Mercer International Inc. us:merc 64.3m $659.4m $1363.0m $200.5m $196.0m 6.8x 7.0x

Towers Watson & Co. us:tw 70.1m $7072.5m $6446.9m $721.4m $785.5m 8.9x 8.2x

Arthur J. Gallagher & Co. us:ajg 159.0m $6978.2m $8382.7m $726.8m $892.2m 11.5x 9.4x


EV/EBITDAEBITDA

BUY People Corp. (PEO:TSX-V)

Recent Share Price $2.70 2011 2012 2013 2014E 2015E

12-Month Price Target $3.15 Sales ($MM) $24.4 $27.2 $32.9 $44.7 $53.6

Capital Return 16.7% Y/Y Growth 18.0% 11.2% 21.1% 35.8% 20.0%

Market Cap ($MM) $106.9 Adj. EBITDA ($MM) $2.3 $2.7 $4.3 $7.8 $11.8

S/O (mm) 39.6 Y/Y Growth 25.6% 15.5% 60.3% 79.8% 51.3%

Current EV ($MM) $112.3 EPS (dil.) $0.01 $0.02 $0.01 $0.08 $0.15

Financial Year End Aug-31 Y/Y Growth 450.0% 57.1% -64.6% nmf 93.1%

P/Sales 0.5x 0.4x 1.2x 2.4x 2.0x

EV/Adj. EBITDA 6.3x 4.1x 12.7x 14.3x 9.1x

P/Adj. EBITDA 5.6x 4.5x 8.8x 13.7x 9.0x

P/E 28.6x 16.8x 147.6x 34.2x 17.7x

Debt ($MM) $3.0 $2.2 $19.2 $15.1 $10.0

Debt/Adj. EBITDA 1.3x 0.8x 4.4x 1.9x 0.8x

Debt/Equity 0.2x 0.2x 1.4x 0.5x 0.3x


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PRI ran up on speculation a buyer had surfaced with its strategic review. This remains a catalyst for the shares and is likely keeping the shares in the current trading range.

Outlook. Operationally, the Company will continue to be in a transition period with significant plant expenditures driven by contract commitments and environmental compliance for the next 6 – 8 months. Realistically, normal operations and financial performance won’t return until F16. For Q3 we are expecting revenue of $12.6M, EBITDA of $3.4M, and a loss of $0.02 per share.

Valuation. Our target price for PRI is determined using a simple average of DCF analysis (8.5x terminal EBITDA multiple / 12.5% discount rate) and F15E EV/EBITDA peer group multiple.

| PRIMARY ENERGY RECYCLING CORP | PEER GROUP


Shares/Units Market


Algonquin Power and Utilities Corp. ca:aqn 224.8m $1926.8m $3312.7m $282.8m $321.5m 11.7x 10.3x

Atlantic Power Corp. ca:atp 120.7m $335.6m $2044.8m $255.0m $247.4m 8.0x 8.3x

Boralex Inc. ca:blx 38.4m $480.0m $1248.4m $150.7m $166.2m 8.3x 7.5x

Capital Power Corp. ca:cpx 83.0m $2183.4m $3622.4m $423.9m $522.1m 8.5x 6.9x


EBITDA EV/EBITDA

BUY Primary Energy Recycling Corp. (PRI:TSX)

Recent Share Price $4.65 2011 2012 2013 2014E 2015E12-Month Price Target $6.00 Sales ($MM) $53.7 $54.3 $56.1 $49.2 $57.4Capital Return 29.0% Y/Y Growth 1.8% 1.0% 3.4% -12.4% 16.7%

Total Return 35.1% EBITDA ($MM) $35.0 $24.2 $25.0 $4.9 $34.3Market Cap ($MM) $207.9 Y/Y Growth 0.7% -30.7% 3.3% -80.4% 597.9%

S/O (mm) 44.7 EPS (dil.) $0.00 $0.20 -$0.04 -$0.18 $0.30Current EV ($MM) $249.4 Y/Y Growth -100.0% nmf -121.2% -318.9% 269.5%Financial Year End Dec-31Dividend (Quarterly) $0.07 P/Sales 3.7x 4.0x 3.9x 4.2x 3.6xDividend Yield 6.0% EV/EBITDA 6.3x 11.0x 10.4x 51.6x 6.9x2014E Payout Ratio 41.6% P/EBITDA 5.7x 9.1x 8.8x 42.3x 6.1x

P/E nmf 24.3x nmf nmf 15.4x



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An update with Management provides us the conviction to highlight this name. SJ continues to enjoy strong markets for its two key products (ties and poles), making the timing of recent acquisitions even more strategic. SJ completed two acquisitions in the last year – PWP (November 2013) and Boatright (May 2014), adding valuable capacity to meet demand. Organic growth, higher pricing, and acquisitions will drive positive comps for Q3 and Q4. Canadian dollar weakness against the US dollar will also have a positive impact on conversion.

SJ Getting Selling Prices Back in Sync for Railway Ties. Untreated tie inventories have been tight across the industry because of overall demand for wood products, and this has driven up prices, undercutting the benefits of higher volumes. SJ is making progress on adjusting selling prices, expecting to have initial adjustments made for most of its multi-year contracts by the end of the year. Further pricing adjustments will likely be required next year as they cycle through the annual anniversaries of the multi-year contracts. SJ’s inventories are well below historical levels, and this will mean SJ will need to use green ties to meet demand while they get inventory levels back in order. This will result in a slower recovery of margins as green ties need to be boultonized (a process that requires treating solution and cylinder time) to reach comparable moisture content reached by air-drying,

Broadening Consensus for Utility Pole Replacement. A common understanding has surfaced for the utility industry, and the pole business is gaining momentum with larger customer orders for replacement programs. This will translate to attractive fundamentals for this business segment.

Near Term Catalysts. Pricing and volume growth coupled with the integration of Boatright will lift Q3 performance. Tie volumes continue to increase, and SJ is making progress on adjusting selling prices. For the pole business, momentum continues and volume and pricing are moving in the right direction. Medium to longer term catalysts include further investment in treating capacity as well as additional acquisitions to supplement the tie, pole and consumer lumber business units.

Outlook. For Q314, we are expecting revenue of $368.4M, EBITDA of $53.0M and EPS of $0.49.

Valuation. Our target price for SJ is determined using a simple average of DCF analysis (12.0x terminal EBITDA multiple / 10% discount rate) and historical P/E analysis, employing a multiple of 18.7x.

BUY Stella-Jones Inc. (SJ:TSX)

Recent Share Price $30.22 2011 2012 2013 2014E 2015E12-Month Price Target $35.50 Sales ($MM) $640.1 $717.5 $970.1 $1,266.1 $1,380.7Capital Return 17.5% Y/Y Growth 14.1% 12.1% 35.2% 30.5% 9.1%

Total Return 18.4% EBITDA ($MM) $96.7 $120.3 $155.0 $175.9 $214.2Market Cap ($MM) $2,080.4 Y/Y Growth 36.1% 24.4% 28.9% 13.5% 21.8%

S/O (mm) 68.8 EPS (dil.) $0.87 $1.13 $1.34 $1.55 $1.95Current EV ($MM) $2,537.2 Y/Y Growth 53.8% 30.2% 18.3% 15.6% 25.6%

Financial Year End Dec-31Dividend (Quarterly) $0.07 P/Sales 1.0x 1.7x 1.9x 1.6x 1.5xDividend Yield 0.9% EV/EBITDA 8.6x 13.2x 14.5x 14.2x 11.3x2014E Payout Ratio 17.0% P/EBITDA 6.7x 10.3x 12.1x 11.8x 9.7x

P/E 11.6x 16.9x 20.3x 19.5x 15.5x



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Disclosure Requirements Is this an issuer related or industry related publication? Issuer Industry Does the Analyst/Associate have a financial interest in securities of the subject issuer? If yes, nature of interest:

AlarmForce Industries Inc. Yes No

Alaris Royalty Corp.– Analyst family member owns common shares Yes No

Black Diamond Group Limited – Analyst family member owns common shares Yes No

Canexus Corporation – Analyst’s family member owns shares Yes No

CWC Well Services Corp. Yes No

Cervus Equipment Corporation Yes No

Computer Modelling Group Limited. – Analyst’s family members own common shares Yes No

DirectCash Payments Inc. - Analyst and analyst’s family member owns common shares Yes No

Gamehost Inc. Yes No

Input Capital Corp. Yes No

K-Bro Linen Inc. Yes No

MCAN Mortgage Corporation Yes No

Mediagrif Interactive Technologies Inc. Yes No

Northern Frontier Corp. Yes No

People Corporation Yes No

Primary Energy Recycling Corp. Yes No

Stella-Jones Inc. Yes No

Is Acumen Capital Partners a market maker in the issuer’s securities at the date of this report? Yes No Does Acumen Capital Partners beneficially own more than 1% of any class of common equity of the issuer?

Yes No

Does Acumen Capital Partners or the Analyst/Associate have any actual material conflicts of interest with the issuer?

Yes No

Does the Analyst/Associate or Household member serve as a Director, Officer, or Advisory Board Member of the issuer?

Yes No

Has the Analyst/Associate received any direct compensation from the subject companies in the past 12 months?* Yes No

Has Acumen Capital Partners managed or co-managed an offering of securities by the issuer in the past 12 months?


Alaris Royalty Corp. Yes No

Black Diamond Group Limited Yes No

Canexus Corporation Yes No



Computer Modelling Group Limited. Yes No

DirectCash Payments Inc. Yes No







People Corporation. Yes No


Stella-Jones Inc. Yes No


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Has Acumen Capital Partners received compensation for investment banking and related services from the issuer in the past 12 months?


Alaris Royalty Corp. Yes No

Black Diamond Group Limited Yes No

Canexus Corporation Yes No



Computer Modelling Group Limited. Yes No

DirectCash Payments Inc. Yes No







People Corporation Yes No


Stella-Jones Inc. Yes No Other disclosures:

Yes No

* Acumen has a pool for compensation purposes, which includes research analysts, investment banking personnel, sales people and institutional traders. Revenue in the pool includes trading commissions, advisory fees, new issue commissions and broker warrant proceeds.

Acumen Recommendation Structure: Buy , Speculative Buy , Hold, Reduce , Under Review , Tender Full Recommendation Structure explanation can be found at the Acumen Capital Partners website: www.acumencapital.com

The information transmitted is privileged, confidential, may be subject to copyright and is intended solely for the use of the individual or entity to which the transmission is addressed. This transmission is provided for informational purposes only, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such would be prohibited, nor in any jurisdiction where Acumen is not registered to do so. The views expressed are those of the sender and not necessarily those of Acumen Capital Finance Partners Limited or its subsidiaries. Any unauthorized use, distribution, review or disclosure is prohibited. If you received this in error, please notify the sender and delete or destroy this message and any copies. Acumen does or seeks to do business with companies covered in our research comments and reports. As a result, investors should be aware that the firm may be in a conflict of interest. Investors should consider this report as only a single factor in making their investment decision©2014.

http://www.acumencapital.com/


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ACUMEN CAPITAL | STAFF LIST ACUMEN CAPITAL | PARTNERS

RESEARCH

Brian D. Pow, MBA Vice President Research, Equity Analyst (403) 571-0303 [email protected]

Trevor Reynolds Oil and Gas Research Analyst (403) 410-6842 [email protected]

Mike McMeeken Research Associate (403) 571-0530 [email protected]

Mark Zalucky Research Associate (403) 410-6840 [email protected]

INSTITUTIONAL SALES

Brian Parker President & CEO, Institutional Sales (403) 571-2514 [email protected]

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Andre Drouillard, CFA Institutional Sales (403) 571-0685 [email protected]

Robert Cooper, CFA Institutional Sales (403) 571-0324 [email protected]

TRADING

Liam Farrell Head Trader (403) 571-0318 [email protected]

David Waite Institutional Trading (403) 410-6730 [email protected]

Jesse Ahlan Institutional Trading (403) 571-0148 [email protected]

Crystal Bellefountaine Associate (403) 571-0314 [email protected]

INVESTMENT BANKING

Kelly Hughes Vice President, Investment Banking (403) 571-5036 [email protected]

Ian Thomson Vice President, Investment Banking (403) 571-0301 [email protected]

Shawn Ostrow Investment Banking Associate (403) 571-0319 [email protected]

RETAIL SALES

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Imran Mulji Investment Advisor (403) 571-0112 [email protected]

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Craig Madill Investment Advisor (403) 410-6018 [email protected]

Erin Williams Investment Advisor Assistant (403) 571-2416 [email protected]

Donny Woo Vice President, Sr. Investment Advisor (403) 571-2510 [email protected]

Darren Fong Investment Advisor (403) 441-2754 [email protected]

Alan Tolg Investment Advisor (403) 410-2042 [email protected]

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