12.15
RBC CM Sector Perform, Above Average Risk, Price Target: $4.00 (prev. $3.75)
The fund announced a cut in the distribution to $0.40/unit (from $0.70/unit) starting with the distribution that will be declared in January 2010. RBC CM had forecast a distribution cut to $0.50/unit effective in 2011. The fund cited the weak forest products industry (lack of wood residue supply) and the strong Canadian dollar (lower cash flows from U.S. hydro plants) as the main drivers behind the cut. With respect to timing, the fund wants to improve its cash reserves and financial flexibility, and the earlier-than-forecast cut will retain roughly $18 million in 2010. Since the fund will be retaining roughly $0.30/unit of cash by cutting the distribution one-year earlier than RBC CM had expected, it has increased its price target to $4.00/unit (from $3.75). Prior to the cut, RBC CM expected the total return on the units to be roughly 10% consisting of an approximate 17% cash yield coupled with a forecast 10% decline in the unit price. Looking forward, RBC CM expects a similar total return consisting solely of a cash yield.
No Comment.
Add Your Comment