Jan 17, 2020
The Daily Chase: Trans Mountain clears key hurdle; Cannabis 2.0 growing pains
By Noah Zivitz
It’s by no means a Mission Accomplished moment, but Canada’s energy sector all of a sudden has some momentum on its side. The Trans Mountain expansion project cleared a key hurdle yesterday when the Supreme Court of Canada made quick work of dismissing B.C.’s desire to limit shipments of diluted bitumen from Alberta. Combined with TC Energy’s plan to ramp up work on Keystone XL and some progress on Coastal GasLink, and it’s enough to put one of the country’s most outspoken energy experts in a more bullish mood. “We’re up 50 per cent in some names in the last two months because people have said, ‘Alright, we see it, enough is enough,” Canoe Financial hairman W. Brett Wilson told BNN Bloomberg while going on to say he thinks optimism in Western Canada is at the highest level in three or four years. We’ll stress test that sentiment today and chase insight on the outlook for beaten-down stocks in the sector.
CANNABIS 2.0 SPEED BUMP
Edibles, vapes and other next-phase products are supposed to be a revenue boon for the country’s licensed cannabis producers. Unfortunately, the growing pains in 2.0 are already becoming evident. Today, Canopy Growth said it’s revising the timeline for launching beverages (which were due on store shelves this month) “in order to deliver products that meet [its] customers’ high standards.” It’s promising more details when it next releases quarterly results.
NOW WHAT FOR BOMBARDIER?
One day after the plane and train maker’s share price went into a tailspin, en route to the lowest close since 2016, plenty of questions remain about how (if?) Bombardier can restore shattered investor (and customer) confidence. Today, we’ll hear from former Caisse de Depot executive Michel Nadeau. Worth pointing out that despite yesterday’s kitchen sink-style bombshell, 11 of 18 analysts who cover Bombardier still have Buy ratings on the stock as of this morning (we’re reaching out to them, incidentally). Also worth noting the TSX managed to climb to yet another record yesterday despite Bombardier’s 31.8 per cent plunge, which shaved almost nine points off the index.
BEHIND THE SCENES OF CINEPLEX TAKEOVER
We're getting more details today about how Cineplex tied the know with Cineworld. Cineplex reveaeled in new documents with regulators that it's been discussing strategic alternatives with Scotiabank since 2017, and that CEO Ellis Jacob started talking about a potential transaction with his Cineworld counterpart and two other unidentified industry players earlier this year. The filing reveals Jacob managed to squeez an extra couple of dollars out of Cineworld after it initially proposed a takeover at $32 per share. Cineplex shareholders are scheduled to vote on the deal in early February.
CHINA STABILIZES
The world’s second-largest economy expanded 6.0 per cent in the fourth quarter, matching the prior quarter’s rate and also living up to expectations. There were some encouraging details beyond the headline as investment and industrial production picked up steam in December. For the calendar year, China’s economy grew 6.1 per cent (the slowest expansion in almost 30 years) amid a trade feud with the U.S. that’s still simmering with hefty tariffs in place despite the recently-minted Phase One agreement.
CHIPPING AWAY AT RENTAL SUPPLY NEEDS
A new report from Urbanation shows purpose-built rental construction in the Greater Toronto Area is at the highest level since the 1970s. It’s a rare piece of relatively hopeful news for renters in Canada’s largest housing market, and comes just a few days after Canada Mortgage and Housing Corporation data showed Toronto’s vacancy rate stood at 1.5 per cent last year.
OTHER NOTABLE STORIES
-Brookfield Property Partners is poised to benefit from Encana’s decision to re-domicile. S&P Dow Jones Indices said late yesterday BPY will take the gas producer’s place in the TSX 60 and Composite Index next Friday.
-Gap shares are rallying in pre-market trading after the retailer abandoned plans to spin off its Old Navy business.
NOTABLE RELEASES/EVENTS
Notable data: China GDP, retail sales and industrial production; Canadian international securities transactions; U.S. housing starts and building permits
Notable earnings: Schlumberger
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
