Canopy Growth soars to five-month high as weed stock jumps to TSX

Marijuana grower Canopy Growth Corp. surged to the highest in five months after becoming the first weed producer in North America to graduate to a major exchange.

Shares of Smiths Falls, Ont.-based Canopy, which will take its place on the Toronto Stock Exchange starting Tuesday, jumped 14.5 per cent to close at $3.24 in Toronto — the highest level for Canopy since November. The stock is up 8.8 per cent this year, on track for a third annual advance.

“Being the first cannabis producing company in North America listed on a major exchange such as the TSX strengthens the sector,” Bruce Linton, chief executive of Canopy, said in a restatement. “The addition of Canopy Growth helps signal that the world’s view of cannabis has finally shifted, starting right here in Canada.”

Canopy will be the first marijuana stock listed on the TSX a spokeswoman with exchange operator TMX Group Ltd. confirmed in an email.

PI Financial Corp. analyst Jason Zandberg initiated coverage of Canopy on Monday, along with peers Aphria Inc., Mettrum Health Corp. and OrganiGram Holdings, with buy ratings for all four. In a report, Zandberg forecast recreational marijuana sales will begin in Canada in mid-2018, with the combined recreational and medicinal market growing to $7.4 billion ($5.6 billion) in five years.

Shares of Canopy, Aphria, OrganiGram and other peers climbed on April 20 after Health Minister Jane Philpott announced at a United Nations General Assembly special session on drugs that Canada would introduce a legalization bill the following spring.

Canopy first went public with an initial offering in 2010 and traded on TMX Group’s junior Venture Exchange. The stock will transfer to the senior exchange and begin trading there on July 26.

The Venture Exchange is home to smaller companies and has generally less restrictive requirements for listing. Once companies grow to meet the listing requirements for the senior market, they have the option to graduate to the TSX. One in five companies in the benchmark S&P/TSX Composite Index are graduates of the Venture exchange, according to TMX Group.

Last month, Canada Prime Minister Justin Trudeau’s government set up a task force to study how to move ahead with legalization. The group is scheduled to present its report to cabinet in November. 

Bloomberg News

Canadian National Railway Co earnings slip as decline in shipments cut into company’s revenue

TORONTO — Canadian National Railway Co reported slightly lower second quarter earnings on Monday as a decline in shipments cut into revenue, but said it expects volumes to improve in the months ahead.

Chief Executive Luc Jobin said the railway faced a “very challenging volume environment” in the quarter, but sees business improving in the second half.

“We expect the second quarter to be the volume trough for the year,” he said in a statement, noting that the railway expects a big grain harvest in Canada.

Montreal-based CN Rail confirmed its forecast for full-year earnings per share in line with last year’s $4.44 a share.

Net income fell to $858 million, or $1.10 a share, from $886 million, or $1.10 a share, a year earlier.

Revenue fell 9 per cent to $2.84 billion, as carloads fell 12 per cent to 1.25 million.

Excluding the impact of deferred income tax adjustments, adjusted earnings fell to $1.11 a share from $1.15 a share.

Analysts, on average, had been expecting earnings of $1.06 a share on revenue of $2.91 billion, according to Thomson Reuters I/B/E/S.

The railway’s operating ratio, a key measure of efficiency, improved to 54.5 per ent from 56.4 per cent a year earlier.

© Thomson Reuters 2016

NewLeaf Travel Co’s financial woes take centre stage as first flight takes off

HAMILTON, Ont.  — After a five-and-a-half month delay, NewLeaf Travel Co. Inc. launched its first flights Monday amidst an ongoing court battle that still has the potential to foil the latest addition to Canada’s airspace.

The travel company held a ribbon-cutting ceremony at the Hamilton International Airport to inaugurate its first flight, which took off around 10 a.m. ET for Winnipeg despite a morning of severe thunderstorms. Chief commercial officer Dean Dacko said all but two seats on the 156-seat aircraft were sold and other routes this week are “well exceeding” sales expectations.

NewLeaf styles itself as an ultra-low-cost option that will undercut Air Canada and WestJet Airlines Ltd. on price. The company is focusing on smaller airports such as Hamilton and Abbotsford, B.C., and will charge for extras like carry-on baggage to keep its base fares as cheap as possible. A sign at the check-in counter informed Hamilton passengers that carry-on bags cost $40 while the first checked bag costs $35.

NewLeaf is not actually an airline but rather a reseller of seats. It has partnered with Flair Airlines, a B.C.-based charter service, to provide its aircraft and crews.

It’s that status as a reseller that has created many of NewLeaf’s woes. The Canadian Transportation Agency (CTA) ruled in March that it doesn’t have to hold an air licence, meaning that, unlike other startup airlines, it isn’t required to have 90 days worth of funding in its back pocket to protect passengers if it goes under.

Glenn Lowson photo for National Post

Glenn Lowson photo for National PostDean Dacko chief commercial officer of Newleaf, Canada’s latest discount airline boards the airlines inaugural flight out of Hamilton on July 25, 2016 to Kelowna B.C. with a stop in Winnipeg. Hamilton to Winnipeg flights cost around $99 and Hamilton to Kelowna run from $165,
one way not including airport and air travel fees which add approximately $100 on top of the flight cost each way. – FP

NewLeaf originally planned to launch in February and has blamed the CTA’s review of its status for the five-and-a-half month delay. However, emails filed in court indicate that it actually suspended sales because of a lack of funding.

Gabor Lukacs, an air passenger rights advocate who devotes much of his time to battling with Canada’s airlines, has filed an appeal of the CTA’s decision with the Federal Court of Appeal, arguing that NewLeaf’s current status as a reseller could leave its passengers high and dry if it runs out of funds.

Last week, Lukacs took his challenge one step further and asked the court to shut down NewLeaf unless it can post a $3.74 million performance bond to compensate passengers in the event it folds, calling it a “shell company without significant assets.”

The court is reviewing Lukacs’s motion but has not yet made a decision.

“All I would like to achieve is that people are protected,” Lukacs said in an interview. “If there can be other arrangements I would agree to anything, even a lesser amount that has the same effect. I’m just trying to bend backwards to make sure that they can still fly but passengers are safe.”

NewLeaf will not release its financials, but Dacko said its “financial health is amazing.”

“(Passengers) should travel with confidence knowing that every aspect of their consideration, every aspect of their safety, every aspect of their financial investment is protected and that is 100 per cent assured,” Dacko said in an interview.

Despite the legal and financial uncertainties, Dacko said NewLeaf plans to “grow rapidly.” The company will launch its fall schedule next week and will roll out its winter schedule, including sun destinations in the United States, in early January.

NewLeaf is facing fierce price competition from the incumbents, including new competition from WestJet on its Hamilton-Edmonton and Winnipeg-Kelowna routes, but Dacko said he’s just happy to be lowering fares across the board.

“We said back in January that we were going to bring ultra-low fares to Canadians because they deserve them and they’ve been looking for them for a very long time,” he said. “Lo and behold, we’ve done that. Others have joined the party and we’re thrilled about that.”

Five things passengers can expect on NewLeaf, Canada’s latest in super-cheap air travel

The latest addition to Canada’s air-travel scene launched Monday morning with an almost-full flight from Hamilton to Winnipeg. NewLeaf Travel Co. Inc. will offer flights to 11 Canadian cities beginning this week, and chief commercial officer Dean Dacko said it will add more destinations soon.

The company is not technically an airline, but rather a reseller of seats. Passengers who buy tickets through NewLeaf will actually be flying on planes operated and crewed by Flair Airlines, a B.C.-based charter service.

NewLeaf styles itself as a ultra-low-cost carrier with the goal of undercutting Air Canada and WestJet Airlines Ltd. on price. Hamilton to Winnipeg flights go for $99 and $165 Hamilton to Kelowna one-way, not including airport and air travel fees which run about $100 on top of the flight cost each way. 

However, passengers should expect to pay for any extras. Here’s what else to expect from NewLeaf:

Bags will cost you — even if they’re carry-on

Glenn Lowson photo for National Post

Glenn Lowson photo for National Post Passengers check in at Newleaf, Canada’s latest discount travel offering before an inaugural flight from Hamilton to Kelowna B.C. with a stop in Winnipeg. NewLeaf charges $40 for a carry-on bag at the check-in counter or $80 at the gate.

One of the characteristics of an ultra-low-cost carrier is that they keep fares low by charging for extras, including things passengers may not be used to paying for. For example, NewLeaf charges $40 for a carry-on bag at the check-in counter or $80 at the gate. Checking your bag is actually cheaper: $35 at the check-in counter ($70 at the gate) for the first bag, and $45 at the check-in counter ($90 at the gate) for the second bag.

You won’t be flying on a NewLeaf plane

Kelowna, B.C.-based Flair Airlines has signed what’s known as an ACMI lease with NewLeaf, meaning Flair will provide the aircraft, crew, maintenance and insurance. Eventually, NewLeaf plans to paint the Flair aircraft with its own colours, but for now the planes are adorned with Flair’s black and gold logo.

NewLeaf may not be coming to an airport near you

Glenn Lowson photo for National Post

Glenn Lowson photo for National PostPassengers board Newleaf flight in Hamilton. NewLeaf is purposely sticking to smaller airports, partly because the landing fees are lower and partly because it aims to cover routes that it believes are underserved by the big airlines.

NewLeaf is purposely sticking to smaller airports, partly because the landing fees are lower and partly because it aims to cover routes that it believes are underserved by the big airlines. This means that it’s flying out of Hamilton and Abbotsford, B.C., but has no plans to fly out of Toronto’s Pearson International Airport or the Vancouver International Airport.

NewLeaf plans to grow rapidly

The company is launching with flights to 11 Canadian cities (Victoria, Abbotsford, B.C., Kelowna, B.C., Kamloops, B.C., Edmonton, Regina, Saskatoon, Winnipeg, Hamilton, Halifax and Moncton, N.B.), but chief commercial officer Dean Dacko says the plan is to add new routes quickly, including flights to sun destinations in the United States.

Postmedia News

Postmedia NewsThe first NewLeaf flight lands in Winnipeg on Monday.

Passengers need to be flexible

NewLeaf doesn’t fly to its destinations every day. In fact, most routes are only served two or three days a week. The company says it will consider expanding its schedule if a given route is selling out on a regular basis.

Teck Resources Ltd and First Quantum Minerals Ltd upgraded at Canaccord

Teck Resources Ltd. and First Quantum Minerals Ltd. were upgraded at Canaccord Genuity, where analyst Dalton Baretto sees a “pinprick of light in the commodities tunnel.”

Telling clients that the long-term demand fundamentals remain positive, he assumed coverage of the Canadian base metals sector by raising his rating on Teck to hold from sell, and upping his recommendation on First Quantum to buy from hold.

The other two names under coverage – HudBay Minerals Inc. and Lundin Mining Corp. – are rated buy.

Baretto’s top pick is Lundin, partly because it appears to be the least expensive of the four stocks.

The analyst also pointed out that it’s set for significant net asset value gains through 2017, as major capex spending is completed for the Los Diques tailings management facility at the Candelaria mining project in Chile.

“While we note the lack of production growth at Lundin as a major drag on the company’s stock price in the current environment, we believe that the outcome of the strategic review process on Tenke and the related choices made by management could be a significant catalyst for the shares over the next few months,” he said in a report.

First Quantum is what Baretto considers his growth pick, as it is the only company he covers with a growing copper production profile. It is set to rise by 75 per cent by 2019 as both the Sentinel and Cobre Panama projects ramp up.

The analyst also noted that First Quantum is his riskiest and most expensive name on near-term metrics, but the cheapest on a net asset value basis.

As for Teck, Baretto noted that the stock is trading far outside its historical range on both short and long-term metrics, and it remains significantly leveraged – something the analyst doesn’t see improving in the near term.

“…However, given the company’s status as the largest and most diversified base metals producer in Canada, we believe that Teck will continue to trade at elevated levels as investor funds continue to enter the sector in anticipation of a cyclical upturn in the base metals,” he said. “We also believe that the ongoing improvement in met coal and zinc prices will provide support to current trading multiples.”

Star Wars could propel the U.S. toy industry to its best year since 1999

The Force is with the U.S. toy industry this year.

Demand for Star Wars merchandise is set to propel toy sales growth to a 17 year-high, according to industry research firm The NPD Group.

Toy sales rose 7.5 per cent in the first half of 2016, pointing to the fastest growth since 1999, the NPD said.

Star Wars toys, the majority of which are produced by Hasbro Inc, was the biggest contributor to the sales growth, with dollar sales for Star Wars toys nearly tripling through June.

“Star Wars is already at US$300 million for the year,” U.S. toys industry analyst Juli Lennett wrote in the report.

Toy sales typically shoot up in the year-end holiday season.

This year’s sales have been fueled by collectibles, inspired by the rebooted classic Star Wars franchise and a slew of Marvel’s superhero films.

Content is increasingly helping drive toy growth as kids get immersed in their favourite characters from the numerous sources such as movies, Netflix or YouTube, Lennett said.

CNW Group/Toys "R" Us (Canada) Ltd.

CNW Group/Toys "R" Us (Canada) Ltd.Toys “R” Us customers choosing Star Wars(TM) toys and collectibles on #ForceFriday.

Star Wars sales could be bigger than last year when it totaled US$700 million, she added.

Hasbro said in July that Star Wars and Disney’s Frozen were the fastest-growing businesses in the quarter ended June 26. The company expects Star Wars merchandise sales of about US$500 million this year, roughly the same as last year, helped by “Rogue One: A Star Wars Story” scheduled to release in December.

The company said it would begin shipping “Rogue One” merchandise in the current quarter.

“Toys with movie tie-ins will continue to contribute to the increase, stemming from those released both in 2015 and 2016,” Lennett said.

Sales of toys based on new movies such as “Teenage Mutant Ninja Turtles: Out of the Shadows,” “The Secret Life of Pets” and “Trolls” are expected to boost the toymakers’ sales in the second half of the year.

Another big contributor to sales this year was the dolls category, which rose 14 per cent in the first half of the year, the NPD said.

The largest U.S. toymaker Mattel Inc said last week that sales in the Barbie business jumped 23 per cent, its biggest quarterly increase since at least 2009.

Mattel revenue is expected to decline to US$5.56 billion this year, while Hasbro is likely to report a record US$4.79 billion, according to StarMine. 

© Thomson Reuters 2016

How predictive analytics discovers a data breach before it happens

Man typing on a laptop. Cybersecurity experts are constantly trying to keep pace with changes in the volatile landscape of IT security. Despite sophisticated tools and solutions, every IT security officer knows that data breaches eventually happen — and they usually go undetected for a long time. What if we could stay ahead of threat actors and predict their next attack before they take their first… Read More

Scenes from the Asean dinner

Foreign ministers of the Association of Southeast Asian Nations (ASEAN) and their counterparts from dialogue partner countries join in a gala dinner. Rough Cut (no reporter narration).