JMRD Market Observer for September 15, 2017 – Teranet-National Bank House Price Index

In This Week’s JMRD Market Observer



  • Teranet-National Bank House Price Index: Negative print for Toronto index in August

  • Multiple Asset Class (MAC) Basket Update

  • JMRD Basket Corner

  • Retirement Corner

  • Reads of the Week

  • Economic Calendar

  • Earnings Reports



Teranet-National Bank House Price Index: Negative print for Toronto index in August


OPINION: The recent loosening of the Toronto home resale market translated into Toronto’s HPI dropping in August. In fact, Toronto’s unsmoothed index (see note on methodology next page), which had already dropped in July, fell 4.2% in August (top chart). That being said, Toronto active-listings-to-sales ratio, an indicator of market conditions, turned from being very tight early in the year to indicating a balanced market in August (at 2.5, its value was in line with its long-term average – middle chart). This should limit the potential for further price correction in the Queen City. Yet more price declines cannot be ruled out given the expected tightening of qualification rules for uninsured mortgages and interest rate increases. These factors are expected to have the most impact on prices in markets where homes are the most expensive (Toronto and Vancouver). We expect home prices to be more resilient in other markets, such as Montreal which has been hot this summer. 


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Multiple Asset Class (MAC) Basket Update


As we have done in the past, we have attached the latest monthly update from the Multiple Asset Class (MAC) Basket, which is managed by Michel Falk and Ralph Hartmann of FNB Capital Asset Management in Montreal.  The MAC Basket, one of JMRD’s key holdings, is an actively managed portfolio of exchange traded funds (FNB is the French acronym for ETF) spanning various geographies and asset classes, including alternative asset classes.  It is managed with the goal of providing superior risk-adjusted returns while minimizing volatility.  Please see the attached update to view FNB’s current positioning heading into the final quarter of 2017.


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JMRD Basket Corner


DIG Basket


Canadian Natural Resources (CNQ) – Canadian Natural announced the acquisition of Cenovus’s Pelican Lake assets and other northern AB volumes for consideration of $975 million, in an all cash deal expected to close by September 30th. Given the relative small size of the acquisition, we believe the deal is marginally positive, but strategic to Canadian Natural. We estimate that cash flow accretion is in the 2% range. The Pelican Lake assets are currently producing at 19,600 boe/d, which represents per flowing barrel metrics of $50,000/BOE/d, and implies a cash flow multiple of approximately 7.0x. This transaction consolidates Canadian Natural’s position in the Pelican Lake region, where the company currently produces about 47,000 bbl/d and owns 62% of the pipe line that will also be consolidated. We expect additional operating synergies to be captured over time which likely improves both volume and costs, improving the netback from what is approximately $20/bbl today. Through infill and polymer flood initiatives across the acreage, the acquired assets could potentially be doubled over time.


Dollarama (DOL) – Dollarama announced this week that the company intends to purchase for cancellation up to 450,000 of its commons shares through private agreements.


SNC Lavalin SNC) – The company provided a numeric (although not exactly clean) medium-term guidance ($5.00 in consolidated EPS by 2020E, implying $3.87 in core earnings vs. $2.58 we model in 2018E), reiterated 7% EBITDA margin for the core legacy E&C SNC business and showed a blueprint on early days of the WS Atkins integration. Our sense is that once that Champlain / deferred prosecution agreement (DPA) come to positive resolutions, the overhang removal should act as a major multiple re-rating opportunity. Given the body language from the management team we are increasingly confident that being the case. By-sector/asset scan. 407 ETR – valuation to increase at 5% CAGR over the next 10 years (up 60% vs. now). Mining seeing a nice pick-up ($1 bln backlog by year-end). Power – lots of nuclear / renewable upside. Oil & gas – in negotiations / bidding on $10 bln of contracts (total funnel is $70 bln). Infrastructure – strong market; waiting for contract to come through ($50 bln funnel in Canada alone). Atkins – the market is likely underappreciating the asset’s quality. Cost synergies target of $120 mln re-affirmed; internal work on identifying revenue synergies (likely in infra, nuclear, technology areas). 70% of the pro-forma E&C business is now levered to consulting (higher margin, lower risk, and theoretically higher EV/EBITDA multiple). The shares do not deserve the 5.4x 2018E EV/EBITDA multiple. Hence, our positive stance on the story (and close to $90 value by 2020).


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All-Cap Growth Basket


CGI Group (GIB.a) – CGI announced that it will repurchase 4.85M of its shares held by Caisse de Depot


Innergex Renewable Energy (INE)Innergex traded up to a new year-high this week. Attached is an update on the company’s growth opportunities and outlook in light of the recent rise in share price. 


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Savaria Corporation (SIS)Savaria announced a 38% dividend increase this week and the stock trader higher by 8% following the announcement. We attached an update on the company following a visit to their manufacturing facility in China.


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Retirement Corner




Reads of the Week









Economic Reports


Monday September 18th – None

Tuesday September 19thManufacturing sales (CAD)

Wednesday September 20th – None

Thursday September 21st – Initial jobless claims (USD)

Friday September 22nd – Retail Sales (CAD)



Earnings Reports


Monday September 18th – None

Tuesday September 19thNone

Wednesday September 20th – None

Thursday September 21st – None

Friday September 22nd – None



Enjoy the weekend!

By | 2017-09-18T12:54:18+00:00 September 15th, 2017|JMRD Updates|0 Comments

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