Analyzing Transat AT, Dollarama, and Premium Brands Holdings: Recommendations from Analysts on What to Do with the Shares

2023-07-11 22:44:41

The amount received of approximately $51 million is in line with the book value granted to it, indicates Benoit Poirier of Desjardins Securities. (Photo: 123RF)

What to do with the shares of Transat AT, Dollarama and Premium Brands Holdings Corporation? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

Transat AT (TRZ, $5.09): a catalyst for the company’s turnaround

Yesterday morning, the management of the air carrier and tour operator announced the sale of land in Puerto Morelos, Mexico for an amount of 38 million US dollars (M$US) to the Finest Resorts group. The transaction is expected to close in the fourth quarter.

Benoit Poirier, analyst at Desjardins Securities, considers that this transaction fits well with the firm’s strategic plan, which intends to focus on air carrier activities.

The amount received of approximately $51 million is in line with the book value given to it, the analyst said. This amount corresponds to approximately $1.28 in the analyst’s target price calculation assuming a conversion price of US$1.00 for $1.37.

The proceeds of the sale will be immediately dedicated to repay part of the guarantee facilities or the line of credit, both maturing in April 2025, and which bear interest at approximately 14.7% and 9.7% respectively. By allocating half of the amount to each loan, Transat will achieve tax savings of approximately $6 million. The amount is significant, as it reduces the total debt/earnings before interest, taxes and amortization (EBITDA) multiple to less than 9 times, the analyst points out.

The sale will also result in crystallizing the value of an asset that was idle, which should send a positive message to shareholders and bondholders, while strengthening the firm’s situation, the analyst believes.

The announcement had little effect on the stock yesterday. Benoit Poirier of Desjardins still recommends keeping the title, and maintains its target price at $5.25.