WestJet shares continue to soar
Also: Rob Lauzon brings two under-the-radar oil and gas names to Market Call
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
Aren’t airline stocks supposed to be a bumpy ride for investors? That certainly hasn’t been the case for WestJet (TSE:WJA), whose shares have more or less been on a steady climb for the last two years, and recently passed the $30 threshold on the back of a record load factor of 89.3 per cent in August. AltaCorp analyst Chris Murray thinks the company’s shares could continue to climb, and he has a 12-month target of $34 on them. Why? Multiple expansion, he says. “Multiples for peers continue to expand driven we believe by encouraging outlooks across the industry as well as by improving economic fundamentals and we continue to expect earnings improvement supported by a strong and rational demand environment.”
Meanwhile, Rob Lauzon, the managing director of Western Canada for the Middlefield Group, was on BNN’s Market Call this morning, and he delivered three interesting top picks. One, Kelt Exploration (TSE:KEL) is a well-known name at this point. The Coles’ Notes version: great management, good assets and clear line-of-sight to double-digit production and cash flow per share growth. After pulling back a bit, Lauzon thinks it represents good value for investors – particularly given the fact that its 2014 cap-ex budget is weighted towards the second half of the year, which should give it some operational torque over the next couple of quarters it reports.
The other two were decidedly less familiar, though. Paris Energy (TSXV:PI) – soon to execute a reverse 12-to-1 split and rename itself Mapan Energy after the private company that bought it in a reverse takeover in July – is still largely a secret among investors, but Lauzon likes its upside. It purchased some old Shell assets in the Deep Basin, has no debt on its balance sheet and is run by Dick Walls, formerly of Fairborne Energy and C&C Energia, and a former Encana executive. “There’s not much research on it, and not much in the way of marketing,” Lauzon said. “But it’s one that, in a strong gas market, definitely has the possibility to be up 50 per cent. And on a valuation standpoint, it trades at half the valuation of a lot of its comparables. Based on that, it just looks way too cheap – it’s being mispriced by the market. And once the market understands it better over the next few months, the stock should move well higher.” He also liked Leucrotta Energy (TSXV:LXE), which was spun out to investors from Crocotta Energy when it was acquired by Long Run Exploration earlier this year. It holds Crocotta’s lower Montney assets, and Lauzon says his firm held onto the shares it received when the Crocotta transaction closed and bought more through warrants and the open market. “We like this – we think there’s a lot of upside in Leucrotta if the lower Montney works, which we’re getting some indication that it might.”