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1. Thursday February 26, 2009 S&P/TSX Composite +72.97 7932.30 CANADA Dow Jones -80.05 7270.89 The S&P/TSX Composite advanced on Wednesday, buoyed by strength in…
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  • 1. Thursday February 26, 2009 S&P/TSX Composite +72.97 7932.30 CANADA Dow Jones -80.05 7270.89 The S&P/TSX Composite advanced on Wednesday, buoyed by strength in S&P 500 -8.24 764.90 the resource-laden materials sector and extending its rally from the NASDAQ -16.40 1425.43 previous session. Oil jumped after a U.S. government report showed a S&P/TSX Venture +1.38 854.97 sharp drop in gasoline inventories in the world’s top consumer. Philadelphia SOX +5.97 205.07 Crude Oil (US$/brrl) +1.52 39.96 Fertilizer producer Agrium (AGU) slid after launching an unsolicited offer Gas (US$/mmbtu) +0.14 4.24 to buy U.S. rival CF Industries for US$3.6 billion in cash and stock, in a Copper (US$/lb) +0.04 1.52 move to expand its presence in the nitrogen and phosphate fertilizer Gold (US$/oz) -25.50 969.50 markets. Nickel (US$/lb) +0.13 4.41 Palladium (US$/oz) -2.50 198.00 Toronto-Dominion (TD) reported a 27% drop in quarterly profit as it Platinum (US$/oz) +4.50 1048.50 more than doubled provisions for bad loans, but shares of Canada’s No. 2 Silver (US$/oz) -0.06 13.68 lender rose as the numbers beat expectations. Uranium (US$/lb) -2.00 45.00 Printing, media and telecom group Quebecor (QBR.B) posted a narrower Canadian Dollar -0.0092 0.7957 quarterly loss on Wednesday, helped by strong results at its cable unit and 30 Year Canada +0.08 3.684 in the absence of a loss from discontinued operations. 30 Year U.S. +0.09 3.585 Volatility Index (VIX) -0.82 44.67 UNITED STATES Will Work for Imprisonment Stocks fell on Wednesday after U.S. President Barack Obama warned of stricter oversight for Wall Street, raising the spectre of greater regulation A jobless Taiwan man released that investors fear could sap profits. Obama’s comments near the market from prison two years ago close rattled investors when he said financial institutions that pose a asked police to send him back serious risk to markets should be subject to serious government so he could eat, police and supervision. local media said Tuesday, a grim sign of hard economic times on the island. Lincoln National (LNC) tumbled after reducing its payout by 95%, while Allstate (ALL) also traded sharply lower after cutting its own payout in When police found the 45-year-old convicted half. Zions Bancorporation (ZION) and Hovnanian Enterprises (HOV) arsonist lying on a street in a popular Taipei led banks and builders lower as a realtors group said sales of existing shopping district, he requested a return to life homes decreased 5.3% in January to the lowest since 1997. behind bars, nostalgic for the 10 years he had already served, the China Post newspaper CF Industries (CF) surged after Agrium proposed to buy the U.S. maker reported. of nitrogen fertilizer for US$3.6 billion. Del Monte Foods (DLM) also rallied. The maker of canned fruit and Meow Mix cat food increased its Wang had also contacted police separately full-year earnings forecast, predicting at least $0.64 a share in profit from with his request, a spokesman said. Officers continuing operations. who found him bought him a boxed lunch but declined to send him back to prison, the Chicago Bridge & Iron Co. (CBI) tumbled after the construction police spokesman said. company forecast lower earnings than analysts estimated, citing the global “We advised him to keep looking for work,” recession, and suspended its dividend to save cash. he said. “I don’t know why he can’t find a First Solar (FSLR) fell after the world’s largest maker of thin-film solar job. Maybe employers think he’s not suitable power modules said 2009 sales will be $1.9 billion at most, missing the or that he’s too old.” average analyst estimate of $1.99 billion. Herbalife (HLF) was also down Taiwan is in a severe recession, with a slump sharply after the seller of nutritional and weight-loss supplements forecast in exports leading a record economic 2009 earnings excluding some items of $3.10 a share at most, less than the contraction in the fourth quarter of last year. average $3.15 analyst estimate. This publication is a general market commentary and does not constitute a research report. Any reference to a research report or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
  • 2. – Canadian and U.S. Comments for Thursday Feb. 26, 2009 2 ECON 101 CANADIAN Data Today: No scheduled releases. U.S. Data Today: This morning, Durable Goods Orders (Jan) are expected to fall by 2.50%, after losing 2.60% the previous month, while Durables Ex Transportation (Jan) should fall by 2.10%, after losing 3.60% before that. Initial Jobless Claims (Feb 21) are expected to come in at 630K, up from 627K the previous week, while Continuing Claims (Feb 14) should come in at 4,981K, down from 4,987K before that. Finally, New Home Sales (Jan) are expected to fall to 325K from 331K previously. MARKET MOVERS Technical Indicators: TSX TSX-V NYSE NASDAQ AMEX Advancers 708 410 1170 801 217 Decliners 725 465 1920 1862 260 Net -17 -55 -750 -1061 -43 Notable 52-Week Highs: La Mancha Resources LMA $ 0.57 SXC Health Solutions SXC $ 26.91 MCAN Mortgage MKP $ 10.25 Notable 52-Week Lows: Air Canada AC.A $ 1.03 Inspiration Mining ISM $ 0.46 AutoCanada Income Fund ACQ.UN $ 1.33 Intertape Polymer Group ITP $ 0.54 AIC Global Financial Split ASC $ 0.75 Livingston Intl Income Fund LIV.UN $ 3.74 Brampton Brick BBL.A $ 4.15 MINT Income Fund MID.UN $ 5.36 Bonterra Oil & Gas BNE $ 14.16 MI Developments MIM.A $ 6.01 Brick Group Income Fund BRK.UN $ 1.21 Mountain Province Diamonds MPV $ 0.73 CCL Industries CCL.A $ 21.63 Brompton Oil & Gas Income Fund OGF.UN $ 2.88 Cluff Gold CFG $ 0.81 OPTI Canada OPC $ 1.07 SCITI Trust II CIT.UN $ 5.99 Peyto Energy Trust PEY.UN $ 6.16 Celestica CLS $ 3.80 Phoenix Technology Income PHX.UN $ 4.95 Cinram International CRW.UN $ 0.82 Pacific Northern Gas PNG $ 11.80 Crocotta Energy CTA $ 0.65 Ritchie Bros Auctioneers RBA $ 18.59 Coast Wholesale Appliances CWA.UN $ 1.85 Russel Metals RUS $ 11.64 Duluth Metals DM $ 0.20 Somerset Entertainment SOM.UN $ 0.91 diversiTrust Income Fund DTF.UN $ 6.28 Savanna Energy Services SVY $ 4.59 ECU Silver Mining ECU $ 0.49 TELUS T $ 31.19 Eveready EIS $ 3.20 Twin Butte Energy TBE $ 0.39 First Capital Realty FCR $ 14.80 Taiga Building Products TBL $ 0.18 Fairborne Energy FEL $ 2.47 Transcontinental TCL.B $ 7.63 FP Newspapers Income Fund FP.UN $ 4.50 Trinidad Drilling TDG $ 2.11 Forbes Energy Services FRB $ 0.62 TransForce TFI $ 3.34 FirstService FSV $ 9.70 Domtar UFS $ 0.96 Guardian Capital Group GCG.A $ 3.00 Canadian Satellite Radio XSR $ 0.15 Great Plains Explorations GPX $ 0.15 TDb Split Corp. XTD $ 0.86 Homburg Invest HII.B $ 6.00 YM BioSciences YM $ 0.27 INSCAPE INQ $ 1.64 YIELDPLUS Income Fund YP.UN $ 4.66 This publication is a general market commentary and does not constitute a research report. Any reference to a research report or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
  • 3. – Canadian and U.S. Comments for Thursday Feb. 26, 2009 3 CANADIAN EQUITIES OF INTEREST Listed Alphabetically by Symbol Agrium* (AGU : TSX : $46.03), Net Change: -4.27, % Change: -8.49%, Volume: 3,055,292 CF Industries (CF : NYSE : US$61.77), Net Change: 6.19, % Change: 11.14%, Volume: 17,357,548 Terra Industries (TRA : NYSE : US$23.85), Net Change: -0.97, % Change: -3.91%, Volume: 10,732,064 I'll do you one better. Agrium announced plans to acquire CF Industries for US$72.00 per share in cash and stock - total transaction value is roughly US$3.6 billion. Under the terms of the proposed transaction, holders of CF would be entitled to receive one Agrium common share and US$31.70 in cash for each CF share. Agrium's proposal is conditioned on: 1) CF's termination of its bid for Terra, 2) Negotiation of a definitive merger agreement between Agrium and CF; 3) Receipt of the necessary CF board and stockholder approvals; 4) Receipt of necessary regulatory approvals; 5) The absence of any material adverse changes to CF or its business and the continued operation of CF in the ordinary course of business; and 6) the opportunity to conduct limited confirmatory due diligence. The proposal is not subject to a financing condition. Agrium has sufficient cash resources and committed financing underwritten by a couple of Canadian Banks to fund the cash portion of the offer. Agrium expects to realize substantial annual operating synergies of approximately US$150 million from the combination within three years of closing. Agrium expects the transaction to be accretive to both earnings and cash flow in 2010 and significantly accretive on both measures in subsequent years. Are there any anti-trust issues that may derail this combination? Canaccord Adams Agriculture Analyst Keith Carpenter says this is a global market and the combined company would not alter that balance whatsoever. It’s interesting to note that, both Agrium and CF had serious discussions regarding a potential combination prior to CF's initial public offering in 2005. Bankers Petroleum* (BNK : TSX : $1.45), Net Change: 0.30, % Change: 26.09%, Volume: 8,984,232 Meanwhile in Albania...Bankers has entered into an agreement with International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) for a US$110 million credit facility. Both the IFC and EBRD will take an equal amount of the facility. The facility will be divided into three parts. The first will be for US$10 million, which is available with the preparation and finalization of its environmental remediation plan (and to be used for this purpose). The second will be for US$50 million and will be available only when Brent oil prices stabilize above US$55.00/barrel. The third will be for the remaining US$50 million and will be available when Brent oil prices stabilize above US$62.00/barrel. Bankers will also issue 16 million warrants to IFC and EBRD; each warrant will enable the parties to purchase one common share for $1.50; however, it is only upon certain conditions being met. Canaccord Adams Oil & Gas Analyst Terry Peters views the proposed financing as a positive for Bankers. Peters says that although dependent on higher future oil prices, the company has positioned itself to fast- track the pace of expansion of its significant heavy oil reserve potential in Albania. FirstService (FSV : TSX : $10.26), Net Change: 0.02, % Change: 0.20%, Volume: 102,715 FirstService – LastLoss? This real estate services company posted its fiscal 2009 Q3 results, which saw revenues decline by 7% to $417.9 million, EBITDA decrease by 24% to $29.8 million and adjusted EPS swing to a loss of $0.18 from $0.49 last year. The company posted a GAAP EPS loss of $1.36, which included a $0.62 EPS loss from discontinued operations. The company stated that there was continued resilience in its Residential Property Management and Property Services divisions, while the Commercial Real Estate Services was impacted more significantly by current economic conditions. The company has taken steps to contain costs and align infrastructure with the expected revenue levels. Residential Property Management revenues increased 15% to $144.7 million. The division's EBITDA grew 5% to $10.6 million. Revenues in Commercial Real Estate Services declined 28% to $182.1 million, while quarterly EBITDA, before a non-recurring cost containment charge, was down 59% to $9.0 million. This was negatively impacted by lower brokerage and leasing revenues in all major markets. The Company's Chicago-based U.S. mortgage brokerage and servicing operation was classified as held for sale. MAG Silver* (MAG : TSX : $5.92), Net Change: -0.33, % Change: -5.28%, Volume: 1,151,830 quot;Please, we've been through so much together. Call me Bob.quot; - Sideshow Bob (The Simpsons). While the sideshow between MAG and Fresnillo's management teams continue, work at the partners' Juanicipio project has actually been getting done. However, the most recent piece of completed work, a resource estimate, came in on the dissapointing side of the reaction spectrum. On Tuesday, MAG announced the results of an independent NI 43-101 compliant resource estimate for the 44%- This publication is a general market commentary and does not constitute a research report. Any reference to a research report or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
  • 4. – Canadian and U.S. Comments for Thursday Feb. 26, 2009 4 owned Juanicipio project in Zacatecas, Mexico. The total global silver content increased 12% to 266 million ounces but the silver grade declined 32% to 685 grams per tonne. While Canaccord Adams Senior Mining Analyst Eric Zaunscherb had been expecting the Juanicipio project silver content to increase with the additional infill and exploration drilling of the Valdecañas Vein, he said the dramatic decline in overall grade was unexpected and negative. Zaunscherb also stated that the decline in grade has a direct impact on the net present value of the project. Looking ahead over the next few weeks, Zaunscherb expects important catalysts including incremental exploration results and a scoping study, which may have dramatic impacts on the market. MAG's Annual General Meeting has been scheduled for March 24, 2009. Manulife Financial* (MFC : TSX : $13.68), Net Change: 0.18, % Change: 1.33%, Volume: 11,578,886 KEYWORD: COMMON. Manulife announced plans late Tuesday night to raise up to $275 million through the issue of Preferred Shares (initial dividend rate of 6.60% per annum). Come Wednesday morning, due to big demand, the company upsized its plans and increased its preferred share offering to $350 million. Including the underwriters' option, Manulife may raise up to $450 million in gross proceeds. The dividend rate on the preferred share will reset every five years at a level of 456 basis points (bps) over the then five-year Government of Canada bond (GCAN5YR) yield. The proceeds of the offering, anticipated to qualify as Tier 1 capital for Manulife, will be used primarily for general corporate purposes and the balance will be used to reduce the amount outstanding under the company's credit facility with the Canadian banks. Recall on Monday, Manulife responded to rumours of a potential capital raise by saying, in the absence of a strategic transaction, it does not intend to raise quot;commonquot; share equity capital. The company recently filed base shelf prospectuses in Canada and the U.S., and this lead to many of the rumours. The Canadian shelf prospectus was for $10 billion (debt and/or equity), that was twice the size of the $5 billion shelf prospectus it was replacing. Quebecor (QBR.B : TSX : $17.28), Net Change: 0.77, % Change: 4.66%, Volume: 247,676 quot;You've enjoyed all the power you've been given, haven't you? I wonder how you'd take to working in a pocket calculator.quot; - Tron. Quebec's leading cable and media company reported its Q4 results. While the company reported a loss of $343.7-million, or $5.34 a share, down from a loss of $962.6-million, or $14.96 a share, last year, the loss includes a $671.2-million writedown of goodwill tied primarily to its struggling newspaper business. For the quarter, operating income from continuing operations grew 11.5% to $310.1 million. The largest increase was in the Cable segment, which occurred primarily from new customer growth. Consolidated revenues from continuing operations rose 3.9% to $1.00 billion. Revenues increased mainly in the Cable segment. The company beat many of the key subscription forecasts of David Lambert, Canaccord Adams Telecommunications Analyst. Videotron added 24,000 new basic cable adds and 50,000 net digital cable adds, well ahead of Lambert's forecast of 8,000 and 24,000, respectively. Quebecor said plans to invest in its new wireless network are on track with previously- announced plans to invest between $300 and $500 million over four years are still on track. Questerre Energy* (QEC : TSX : $0.89), Net Change: 0.01, % Change: 1.14%, Volume: 846,325 Junex* (JNX : TSX-V : $0.89), Net Change: -0.05, % Change: -5.32%, Volume: 312,567 Gastem* (GMR : TSX-V : $0.22), Net Change: -0.03, % Change: -10.42%, Volume: 1,241,541 Forest Oil (FST : NYSE : US$14.45), Net Change: -0.40, % Change: -2.69%, Volume: 4,431,226 Talisman Energy* (TLM : TSX : $11.06), Net Change: 0.38, % Change: 3.56%, Volume: 5,417,574 We don't even know the sex of this baby yet. Earlier this week, Forest Oil released test rates from three horizontal drills (in the Quebec Utica) that were below expectations. Canaccord Adams highlights that more evaluation work is needed, and that this is VERY early stages. Currently there have been approximately 11 wells drilled into the play, and we believe that up to 20 wells may need to be drilled in order to properly assess the situation/property. Upcoming catalysts for the play include: next week (March 5) when Talisman reports its Q4 results, and may provide comments on its vertical wells in Quebec’s St. Lawrence Lowlands; and Forest is set to begin additional testing work on the horizontals (may re-stimulate the wells, will re-evaluate the frac jobs) this summer. The key excerpt from Forest's fourth-quarter press release out Monday was: quot;Forest drilled and completed the first three horizontal Utica Shale wells in Quebec's St. Lawrence Lowlands, which were successfully cased and fracture stimulated in four stages with rates ranging 100-800 mcf/d. Frac load flow-back was incomplete due to the lack of coiled tubing units in the area. Forest expects to continue to test its wells after the winter season is over. Although sustained rates were not as high as anticipated, the tests have allowed Forest to identify the section of the shale it intends to target in future test wells. Each of the wells were tested in different sections of the Utica Shale with an objective of gathering data on productivity to allow optimization of future completions. Furthermore, Forest proved the ability to successfully drill the wells horizontally and pump multi-stage slickwater frac jobs without major operational issues.quot; Of note, these first horizontal wells initially tested up to four mmcf/d, with sustained rates up to 800 mcf/d (100-800 mcf/d as Forest stated). This publication is a general market commentary and does not constitute a research report. Any reference to a research report or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
  • 5. – Canadian and U.S. Comments for Thursday Feb. 26, 2009 5 Research In Motion* (RIM : TSX : $51.89), Net Change: 1.33, % Change: 2.63%, Volume: 1,973,717 Research in Microsoft? The high-profile on-line business news publisher Silico
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