Monthly review February 2020

Basic materials Sector

Cascades ends 2019 with solid financial performance

On February 27, the fourth quarter results of the Canadian company Cascades (TSX: CAS) were announced, ending 2019 with a solid financial performance. With an adjusted operating income before depreciation and amortization (OIBDA) of CAD $ 604M, the company repeats a record performance in terms of profitability for the second consecutive year.

Despite the yearly cyclical downturn in demand during the fourth quarter, the drop in raw material prices in all of Cascades’ operating sectors, the acquisitions made by the company as well as the reduction in production costs managed to offset the seasonal nature of the demand. Thus, the optimistic results confirm that the strategic actions are well aligned towards sustained growth for the paper company. For the coming year, the expected cost of raw materials will continue to benefit from a favorable economic climate. In addition, strategic optimization efforts point to cash flow surpluses of more than CAD $ 100M, promising the continuation of a solid financial performance for the year 2020.

Industrial Sector

Waste Connections Inc. [TSX / NYSE: WCN] released good results in the fourth quarter of 2019 on February 17, 2020, in which the company’s profits and revenues exceeded estimates. Revenues of US $ 1.36 billion exceeded consensus by 1.5% and improved 7.9% year over year. Over the past year, Waste Connections shares have risen 25.4% compared to 22.6% growth for the industry it belongs to.

However, WCN shares lost 7.05% on the Toronto Stock Exchange on February 28, 2020, with the share price falling to CAD 123.68. Based on careful analysis, the current consensus on the target price for WCN shares is an average of CAD 89.21 per share.

Nevertheless, the analysis of target prices and performance of stocks has been studied by market experts, and the current consensus on WCN stocks is a recommendation set at 1.50. This rating represents a strong buy recommendation, on a scale of 1 to 5, where 5 would mean a strong sale, 4 represents the sale, 3 is the conservation, 2 indicates the purchase and 1 indicates the strong purchase.

Consumer Cyclical Sector

Alstom acquires the rail division for US$8.2 billion. Bombardier will receive between USD 4.2 and 4.5 billion and Caisse de dépôt will own 18% of Alstom

According to Bombardier, the transaction gives Bombardier Transportation a value of US$8.2 billion. Net of Bombardier Transportation’s cash, Alstom will pay between €5.8 billion and €6.2 billion (US$6.3 billion to US$6.7 billion). 

The Fund will receive the equivalent of US$2.1-2.3 billion for its 32.5% share in Bombardier Transportation, acquired for US$1.5 billion in 2015. It will then receive this amount in exchange for Alstom shares and will also add €700 million (CA$1 billion) to bring its stake in Alstom to around 18%. It will be the largest shareholder and will hold two seats on its Board of Directors.

Bombardier will now have only one division, specialising in business aircraft.

Energy Sector

Hydro-Québec is investing $ 1 billion in Innergex for better exposure on the international market.

Innergex Renewable Energy has started an international expansion in recent years through 68 energy operations in Canada, the United States, France and Chile.

Hydro-Québec has entered a C $ 1.1 billion partnership with Innergex for its future projects. Hydro-Québec becomes the largest shareholder of Innergex with a 20% stake. In this way, Hydro-Québec, a crown corporation, is exposed to the international market.

The epidemic of the Corona Virus paralyzes world economic activity, especially in China, which leads to a reduction in the consumption of fossil fuels over the period (6% of world consumption). According to CREA (Center for Research on Energy and Clean Air) analyst Lauri Myllyvirta, the economic recovery will be redirected towards renewable energies. An advantage that Innergex can benefit from…

Technology Sector

Shopify hits record 

With better than expected results, Shopify reaches a historic level.

Indeed, the company is investing massively to improve its offer. In particular, it invested nearly $ 450 million in 2019 to buy a company with expertise in warehouse technologies.

These investments paid off as transaction volumes increased 47% to $ 20.6 billion in the fourth quarter.

When the results were announced, the actions took nearly 18% and the coronavirus epidemic does not seem to have a significant impact on the company at the moment. The company has managed to achieve positive net profit for the fourth quarter and plans to continue this momentum.

Communication Services

The arrival of 5G

With great anticipation, it is in March of this year that 5G service will make its appearance in Canada.

Rogers (TSX: RCI.A and RCI.B) will lead the charge in the telecommunications sector. In fact, buying a Samsung Galaxy S20 5G phone and subscribing to a 5G plan will give access to the service in downtown Montreal, Toronto, Ottawa and Vancouver. Over the next year, dozens of service outlets will be available to Rogers customers.

It will be interesting to see how the sector will react to this new service. The next year will be crucial in determining which market player will take advantage of the arrival of this new technology.

Consumer Defensive Sector

Alimentation Couche Tard tries for the third time to acquire Caltex

Alimentation Couche Tard is trying for the third time in a row to acquire Caltex by increasing
the price of the proposed share. The Laval company has already offered to acquire 100% of Caltex on November 18, 2019 for the price of AUS $ 34.50 per share which is the equivalent of CAN $ 7.8 billion. After the rejection of the offer, Couche tard increased the proposed price for the third time to $ 35.25 AUS per share. The Australian firm is currently analyzing this offer after turning down the previous bids. This acquisition is very important to the Canadian firm as it will allow it to enter the Asia Pacific market.

Utilities Sector 

Was Canadian regulatory uncertainty the main reason for Teck Resources’ abandonment of the Frontier project?

The abandonment of the Frontier project in Alberta by Teck Resources has more to do with low oil prices than with regulatory uncertainty in Canada, according to economist Éric Pineault. An investment of $ 20 billion was going to be necessary to implement this oil sands megaproject which, in the long term, would generate economic spinoffs of $ 70 billion for the three orders of government.

When the project was presented in 2015, the company predicted that in 2020, the price of a barrel of oil would fluctuate between US $ 80 and US $ 90 for the US WTI, the North American benchmark price. For the company, this price was minimal to start digging. And the company foresaw a barrel of oil at US $ 95 in 2025, when operations began. However, the price of a barrel remains around $ 50 or $ 55. If the global economy were to slow further or fall into recession, it would be difficult to expect a price hike either on the horizon. In addition, North America has been swimming in surplus oil since it began to fracture, says Éric Pineault, of the UQAM Institute for Environmental Sciences, referring to the shale oil boom.

Conventional gas fields are depleting, technology is up to date, and the growth potential of Montney Formation gas is exceptional. Large groups, such as Encana and Shell, have major plans for Montney training. The environmental impact remains unclear, however. This gas could be exported, east or west, less to the south and to the United States. This explains why business investments are mainly made in the construction of gas pipelines and liquefaction infrastructure. The market is therefore very buoyant for gas, much less for the oil sands.


Cascades. (27 février 2020). Cascades annonce de solides résultats pour le quatrième trimestre et l’année 2019. [En ligne]. Disponible :

Journal de Montréal. (12 fevrier 2020). Couche-Tard dépose une troisième offre pour acheter Caltex. Tiré de :

Journal de Montreal. (2020, February 19). Coronavirus: la paralysie chinoise fait chuter le CO2. From

Journal de Montreal. (2020, February 29). Hydro investit 1 milliard$ dans Innergex pour son virage international. From

Reuters. (12 février 2020). Shopify hits record high on better-than-expected 2020 sales forecast. Tiré de :

GlobalNewsWire. (2020). Rogers to Bring Customers Canada’s First 5G Device. [online] Available at: [Accessed 29 Feb. 2020]

Codère & Lévesque. (17 février 2020). Alstom confirme l’achat de Bombardier Transport.Tiré de :

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