TSX Commentary

Yellow Pages Income Fund (YLO.UN) – $5.89 – Takeaways from Analyst Meeting and Investor
Outperform, Average Risk, Price Target: $7.00
Takeaways from analyst meeting and investor luncheon – (i) the roadmap for renewed revenue growth in 2011 under a full-service, integrated marketing services approach was provided; (ii) the company announced the acquisition of a 100% of Clear Sky Media and a 60% equity interest in 411.ca for an estimated ~$25MM; including Restaurantica; these acquisitions bring total unique visitors for the yellowpages.ca network to 9.3MM, or 11.0MM including Trader; and (iii) the conversion to a corporate structure will take place “by the end of 2010″ with the possibility of an “early” conversion. RBC CM expects the stock to trade in the $5-$6 range pending the emergence of a sustainable economic recovery in Canada given current peer valuations as well as public market concerns with the long-term growth outlook for the company. In this respect, RBC CM believes Q2/10 results will represent a crossroad for the stock reflecting: (i) the provision of 2011 guidance; and (ii) early indications of an actual cyclical recovery in directories given the lag in the selling cycle. In the meantime, RBC CM believes a stronger fundamental floor is forming under this $5-$6 range due to: (i) a slowly improving sales environment for directories; (ii) better visibility on a cyclical recovery in vertical; and (iii) the reflation of equity value in RBC CM’s NAV estimate following the distribution cuts. There are no changes to RBC CM’s $7.00 target price.