THE LIST Veritas ' Model Portfolio...Telus Corp. T 24-May-17 $45.47 $50.00 4.3% 18.0 The Jean Coutu Group Inc. PJC/A 24-Jun-15 $20.76 $24.00 2.5% 16.0 TransCanada Corp. TRP 16-Dec-15

Portfolio Yield: 2.9%

COMPANY TICKER DATE ADDEDPRICE (C$)

27-Jul-2017

INTRINSIC

VALUE

ESTIMATE

CURRENT

YIELD

QUALITY

RATING

(out of 25)

Allied Properties REIT AP-U 24-May-17 $38.41 $45.00 4.0% 20.0

Canadian Utilities Ltd. CU 28-Jun-16 $41.46 $46.25 3.4% 17.0

Capital Power Corp. CPX 9-Apr-15 $24.79 $29.50 6.7% 12.5

Cenovus Energy Inc. CVE 7-Mar-16 $10.89 $21.00 1.8% 15.0

CGI Group Inc. GIB/A 22-Nov-16 $66.48 $71.00 0.0% 19.0

Enbridge Inc. ENB 5-Jul-17 $51.65 $66.00 4.7% 17.0

Granite REIT GRT-U 5-May-17 $50.02 $54.00 5.2% 13.0

Husky Energy Inc. HSE 11-Jan-17 $14.66 $21.50 0.0% 13.0

Loblaw Companies Ltd. L 9-Apr-15 $68.75 $85.00 1.6% 16.0

Manulife Financial Corp. MFC 27-May-13 $25.53 $27.00 3.2% 19.0

Maple Leaf Foods Inc. MFI 29-Oct-04 $34.14 $35.50 1.3% 17.5

Metro Inc. MRU 25-Nov-14 $42.30 $51.00 1.5% 19.0

Northland Power Inc. NPI 13-Mar-13 $23.29 $27.00 5.2% 16.5

Quebecor Inc. QBR/B 9-May-14 $44.28 $45.00 0.5% 16.5

Shaw Communications Inc. SJR/B 26-Aug-16 $27.75 $31.50 4.3% 15.0

Telus Corp. T 24-May-17 $45.47 $50.00 4.3% 18.0

The Jean Coutu Group Inc. PJC/A 24-Jun-15 $20.76 $24.00 2.5% 16.0

TransCanada Corp. TRP 16-Dec-15 $63.56 $67.50 3.9% 16.5

Waste Connections Inc. WCN 1-Jun-16 USD $64.42 USD $72.50 0.7% 17.0

Veritas Investment Research, 100 Wellington Street West, TD West Tower, Suite 3110, P.O. Box 80, Toronto, Ontario , M5K 1E7, 416-866-8783, www.veritascorp.com

Veritas Investment Research Corporation owns the copyright in this report. This report may not be reproduced in whole or in part without Veritas’ express prior written consent. Any such breach of this copyright is contrary to ss. 27(1), 34, 35 and 42 of the

Copyright Act, R.S.C. 1985, c. C-42 and will be liable for damages.

July-28-17

THE LIST

T h e V - L i s t i s a c o n c en t r a t ed p o r t f o l i o o f 1 2 t o 2 5 c o m p an i es r e c o m me nd ed b y Ve r i t a s I n v es t m en t R e s e a r c h a s t h e b e s t i n v es t me n t o p p o r t u n i t i e s d r a w n f r o m o u r f i r m’ s

r e s e a r c h .

Ver i tas ' Model Por t fo l io

S t o c k s a r e s e l e c t e d b a s e d o n t h e i r p o t e n t i a l f o r l o n g - t e r m c a p i t a l a p p r e c i a t i o n , u s i n g b o t t o m - up f u n d a m e nt a l a n a l y s i s a n d a s t r i c t r e v i ew o f a c c o un t i ng a n d d i s c l o s u re

p r a c t i ces t o i d e n t i f y c o m p an i e s w i t h d e f e n s i b l e c o m pe t i t i ve a d v a nt a ge s a n d t h e a b i l i t y t o g e n e r a t e m e a n i n g fu l c a s h f l o w s .

Quality Scale

Torpedo Risky Neutral Better Best

5 10 15 20 25

Intrinsic Value Scale

-50% -25% 0 25% 50%

HOWARD LEUNG

hleung@veri tascorp.com

416-866-8783

A H O L Y T R I N I T Y O F L O C A T I O N , Q U A L I T Y , A N D D E V E L O P M E N T

Allied is an office real estate company specializing in Class I office space, emphasizing the adaptive re-use of light industrial structures (i.e.

lofts). With almost 12 million square feet of gross leasable area, the REIT’s properties are concentrated in nine of Canada’s largest major

metropolitan areas, with substantial exposure to the Toronto office market. Allied’s focused strategy of increasing its footprint in the

Toronto Class I industrial market over the past five years has paid off, with unit prices increasing at over 7% CAGR. In our view, the REIT’s

experience in developing Class I office space gives it a unique advantage in Canada, which we expect to contribute top quartile growth

over the near term.

Updated June 27, 2017

Prior Close $39.90

Intrinsic Value $45.00

Current Yield 3.8%

BUY

ALLIED PROPERTIES REIT TSX-AP.UN

QUALITY RATING

Accounting & Disclosure 4/5

Allied now includes recoverable maintenance capex in its

AFFO metric. We view its accounting for the metric as gener-

ally clean.

Adjusted Cash Flows 3/5

Allied’s F16 adjusted AFFO payout ratio was 94%. This was the

first year that Allied suspended its DRIP, and even then the

REIT was still able to meet all of its cash payout obligations.

The Balance Sheet 4/5

The REIT’s debt to gross book value is 37%, far below its maxi-

mum limit of 60%. The REIT’s interest coverage is 2.8x, which is

well above its limit of 1.65x.

Business Operations 5/5

Allied’s well-located, high quality properties have allowed it

to incrementally raise its rents to tenants. The vast majority of

the REIT’s leases are on a triple-net basis, which shield the

trust from sudden hikes in utilities or property taxes. Finally,

given rising property values in Allied’s key metropolitan mar-

kets, we believe Allied has greater ability to pass on any cost

inflation it incurs to tenants.

Corporate Governance 4/5

Annual incentive and long-term performance bonuses for

management are based on specific, quantifiable metrics.

The board is majority independent, although we note that

one trustee is also a partner at Allied’s principal law firm.

INTRINSIC VALUE

Our estimate of F17 AFFO is $1.71 per unit. For the following three

years, we estimate a 8% growth rate, leading to an estimate of

$2.17 of AFFO per unit by 2020. We then apply a terminal multiple

of 22.7x to the REIT’s 2020 AFFO earnings. Discounting the REIT’s

AFFO by its cost of equity of 6.9% brings our intrinsic value to $45

per unit.

Period Ending C$ Millions (except as noted)

F15 F16 Q1-F17

Unit price $31.57 $35.95 $36.09

Units outstanding 78.3 84.7 84.9

Market capitalization $2,473 $3,046 $3,064

Enterprise value (EV) $4,175 $5,058 $5,001

Reported Debt to Gross Book

Value 35.6% 36.6% 36.6%

Revenue $365 $390 $102

Veritas Adjusted AFFO $131 $130 $34

Veritas Adjusted AFFO Total Pay-

out Ratio (includes DRIP) 87% 94% 95%

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DARRYL MCCOUBREY

dmccoubrey@veri tascorp.com

416-866-8783

R A T E B A S E G R O W T H D E L I V E R S I N - L I N E Q U A R T E R CU remains our top pick on account of its discount valuation and impressive organic rate base growth rate of 5% through

F20. While lower achieved distribution ROEs in Alberta is a legitimate concern under second-phase PBR, a higher generic

ROE, continued rate base growth, the efficiency carryover mechanism and a lower efficiency factor largely offset risk.

Updated April 27, 2017

Current Price C$38.85

Intrinsic Value C$46.25

Current Yield 3.7%

BUY

CANADIAN UTILITIES LTD. TSX-CU

QUALITY RATING

Accounting & Disclosure 3.5/5

Better disclosure of financial results in its Energy seg-

ment and a more detailed look at expenditures en-

hances the relative transparency of CU’s financial

results compared to its Canadian peers.


Base FFO of approximately $700 to $750 million per

year is expected, with growth prospects primarily tied

to the 5% core annual growth rate expected in its

regulated businesses (excluding Fort McMurray Tx.


Measured use of leverage and healthy discretionary

cash flow suggests no equity issuances are need to

fund CU’s $5 billion capital spending plan.


Divesting natural gas extraction assets has accelerat-

ed the de-risking process occurring at CU and ACO.X

as the proportion of regulated assets grows.

Corporate Governance 3.5/5

The merits of a relatively low payout ratio are evi-

denced during challenging business conditions for a

utility with a higher business risk profile.

INTRINSIC VALUE

We apply a discount, 1.4x multiple to CU’s F17E rate base to ar-

rive at a $46.25 per share equity value estimate.

Period Ending

(Amounts in C$) Q1-F16 F16 F15

Share price $38.96 $36.19 $32.00

Shares (millions) 269.4 268.1 266.9

Market capitalization (millions) $10,496 $9,700 $8,537

Net debt (millions) $11,030 $11,695 $9,688

Enterprise value (millions) $21,525 $21,396 $18,225

Adjusted EBITDA (TTM, millions) $1,820 $1,716 $1,947

Adjusted EPS (TTM) $2.26 $2.20 $1.81

EV / EBITDA (TTM) 11.8x 12.5x 9.4x

P/E (TTM) 17.2x 16.5x 17.7x

Net debt-to-EBITDA (TTM) 6.1x 6.8x 5.0x

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DARRYL MCCOUBREY


416-866-8783

B R A C E D F O R U N C E R T A I N T Y Recent acquisitions, cost management, and risk management (i.e. hedging exposure to Alberta wholesale power prices)

galvanizes CPX’s plan to deliver 7% dividend hikes in F17 and F18. In our view, the market is taking an overly pessimistic

view of Alberta electricity market reform, as capacity-based, all-in prices support material value upside.

Updated May 2, 2017



Current Yield 6.3%

BUY

CAPITAL POWER CORP. TSX-CPX

QUALITY RATING


CPX’s disclosures are essentially on par with TA, although

forecasting the impact of its portfolio optimization group is

challenging.


Using our base case projection of power prices in Alberta,

CPX’s EBITDA will decline by $100 million post-PPA expiries in

F20. However, given the robust FCF yield currently implied

at its share price, the market has already fully-accounted

for the decline


CPX’s leverage and debt service ratios remain elevated.

However, compared to TA, CPX’s financial risk profile is low,

with an FFO-to-Debt ratio near 20%.


Like TA, CPX is facing significant headwinds due to low

power prices and increasing environmental charges. How-

ever, CPX is better hedged against market and legislative

risk.


CPX is taking a measured approach to new gas develop-

ment in Alberta, awaiting greater clarity on market reform.

We think a wait-and-see approach is appropriate, given

the capital cost associated with G4 and G5.

INTRINSIC VALUE

Taking the Decatur acquisition into account, our value estimate

of CPX increases to $29.50 per share (from $28.50 previously).

Period Ending

(Amounts in C$) Q1-F16 F15 F16

Share price $26.06 $17.77 $23.23

Shares outstanding (millions) 96.2 96.2 96.2




Adjusted EBITDA (millions) $543 $482 $520

Adjusted FCF per share (TTM) $3.09 $3.37 $3.11

EV/EBITDA (TTM) 8.8x 8.4x 8.6x

P/ACFFO (TTM) 8.4x 5.3x 7.5x

Average AB power price per MWh $22 $33 $18

Payout ratio (TTM) 50% 41% 50%

Net debt-to-EBITDA 4.1x 4.8x 4.3x

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

NIMA BILLOU

nbi l lou@veri tascorp.com

416-866-8783

P L A Y I N G T H E L O N G G A M E W I T H F C C LCEO departure, elevated debt levels, required asset divestments and share sales by ConocoPhillips are more than enough to explain recent

pressure on Cenovus’ share price, however, we think investors have become overly fearful. Cenovus’ structurally low sustaining capital costs

(~$7.20 per barrel in 2018 declining to $5 per barrel by 2021) contributes to generating significant free cash flows next year. This is not a company

at risk of going under. In 2018 (at US$55 WTI) Cenovus clears $1.44 per share in free cash after sustaining capital, even at a required yield of 8% on

this cash, Cenovus would be worth $18.00 per share – potentially a double from today’s share price.


Current Price C$9.14/ US$6.87


Current Yield 2.2%

BUY

CENOVUS ENERGY INC.TSX-CVE; NYSE-CVE

QUALITY RATING


Foster Creek's non-fuel operating costs dropped 24% year

over year in 2015, to $8.51. Some of this decline was due to

capitalizing expenditures for some of the project's infill drill-

ing program, which were previously expensed. This is based

on the judgement that these activities enhanced future

production capability, thereby qualifying for capitalization.

Adjusted Cash Flows 3.5/5

We expect Cenovus to generate cash flow of $2.30 to $2.40

per share in 2018 at US$55 WTI. Cash flow can cover a divi-

dend of $0.20 per share and capex of $1.60-$1.80 per

share. Cenovus can use the cash surplus of $0.40 per share

to reduce its leveraged balance sheet.


FCCL purchase was financed with a transaction Cenovus

issued a $3 billion bought deal, issued 218 million shares to

Conoco and $7 billion in debt that will be paid down with

~$4.5 billion in asset sales currently being marketed. Net

debt to 2017 funds flow of 3.1x (US$51 WTI) is elevated but

manageable given the company’s free cash flow.

Business Operations 2.5/5

Given that Cenovus was the operator we don’t expect

much to change at FCCL post transaction. Management

recently disclosed that it plans to reactivate Christina Lake

phase G in 2017 and an additional phase at Foster Creek in

2018.


It remains to be seen whether Cenovus' decision to defer

work and cut all non-essential staff and contractors in 2015

will have a lasting effect on the company's corporate cul-

ture.

Cash Flow and Distributions 2017 Q1 2016 2015

Reported CFO* 328.0 861.0 1,474.0

Capital expenditures (313.0) (1,034.0) (1,714.0)

Available cash (shortfall) 15.0 (173.0) (240.0)

Dividends declared 41.0 166.0 805.0

% of CFO* 13% 19% 55%

% of available cash 273% N/A N/A

* CFO is cash from operations after working capital and asset retirement expenditures

Company profile 2017 Q1 2016 2015

Price 15.05 17.78 17.50

Shares (millions incl. exch.) 833.3 833.3 833.3

Market cap. ($ millions) 12,541 14,816 14,583

Revenue ($ millions) 3,865 12,282 13,064

CFPS 0.39 1.03 1.77

Price to YTD CFPS 9.6x 17.2x 9.9x

ROE (annualized) 7.2% (4.4%) 5.2%

Dividends per share 0.05 0.20 0.97

Production (000's boe/d) 295 272 280

CFO* per boe 12.17 8.69 14.40

Net debt to EV 18% 15% 14%

Net debt to CFO* 2.1x 3.0x 1.6x

INTRINSIC VALUE

Commodity Case WTI Oil Price

2017 / 2021

HH Gas Price

2017 / 2021

USD/CAD XR

2017 / 2021

Intrinsic

Value

$62 Oil Case 51 / 62 3.05 / 3.50 0.75 / 0.80 14.00

$67 Oil - Base Case 54 / 67 3.31 / 3.75 0.76 / 0.81 21.00

$77 Oil Case 57 / 77 3.50 / 4.00 0.77 / 0.85 33.00

Our base case values Cenovus at $21.00 per share, reflecting a return to

US$67 WTI oil and US$3.75 NYMEX gas through 2021.

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

HOWARD LEUNG


416-866-8783

C G I W A L K S T H E W A L K W I T H I T S D I G I T A L R E V E N U E S

Management aims on becoming the one-stop shop for their clients in offering a full-service of systems integration and consulting (‘SI&C’),

outsourcing, and Intellectual Property (‘IP’) solutions. We see progress on all fronts, especially digital IP revenues, which management

continues to pursue from organic and inorganic sources. CGI is not only talking the talk when it comes to digital revenues, but also

walking the walk in executing its IP strategy. In light of these promising results that highlight CGI’s growth, we maintain our BUY

recommendation and C$71.00 price target.

Updated May 4, 2017

Prior Close C$65.55


Current Yield 0.0%

BUY

CGI GROUP INC.TSX-GIB.A, NYSE-GIB

QUALITY RATING


We have no major concerns with CGI’s accounting; however,

we believe the company’s Adjusted EBIT metric (used for credit

agreement purposes) can be skewed by changing capitaliza-

tion and depreciation/amortization policies. Recently, CGI’s

Adj. EBIT margin expansion is driven primarily by a correspond-

ing decrease in amortization expense.

Cash Flow Sustainability 4/5

CGI generates sustainable cash flows from its pipeline of con-

tracts. Working capital draws have been larger than usual (as a

% of revenues); however, we expect this to normalize as Logica

effects are rolled off. As CGI broadens its proprietary software

and solutions business, we expect this “capital-light” business to

reduce working capital needs.

Balance Sheet 4/5

CGI is relatively unlevered and does not have significant debt

maturity payments which require more cash flows than it cur-

rently generates.


CGI has a stable network of enterprise clients which deliver

predictable returns. We also believe that digitization of corpora-

tions and government institutions is a major trend which CGI

can continue to capture in the near future, especially with its

ambitious IP30 growth plan. The company’s proximity-focused

operations allow it to avoid the wrath of governments taking

action against globalization.


CGI trades on a dual class structure, and the majority of the

company’s votes are in Class B shares which are largely held by

the co-founder.

INTRINSIC VALUE

CGI has a $21 million backlog, which after deducting operating ex-

penses, required capex, and net debt, is only worth ~$600 million or

~$2 per share. As a result, rather than looking ‘backwards’ at back-

log, we recommend looking forward at CGI’s future bookings. Our

conservative case assumes CGI grows its bookings and topline reve-

nues at inflation (2.5% p.a.) while continuing to convert ~12% of its

revenues to free cash flow. Under these assumptions, we estimate

CGI is worth ~C$71 per share, including ~$2 per share in backlog, net

of debt. Our intrinsic value does not add any value from CGI’s shift

to digital revenues.

TTM Period Ending C $ Millions (except as noted)

F15 F16 Q2-F17

Share price $48.35 $62.49 $65.55

Shares outstanding; includes

Class B (millions) 307.3 304.8 296.78



Revenue $10,287 $10,683 $10,650

Constant Currency Revenue

Growth Rate -4.0% 0.2% 3.1%

Adj. EBITDA $1,892 $1,959 $1,958

Free Cash Flow Margin Excl.

Working Cap Changes 12.0% 11.6% 11.5%

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

KATHLEEN WONG

kwong@veri tascorp.com

416-866-8783

P R O J E C T S U N R I S E L O O K S T O T A M E S G & A

Sobeys announced a three-year transformation initiative called “Project Sunrise” on May 4th. The project

includes several initiatives with the goal of realizing $500 million in annualized savings by the end of F2020. In

this report, we evaluate Project Sunrise and assess whether the $500 million of expected savings are

reasonable, with a focus on the specific sources of savings. We also discuss a potential discount strategy for

Sobeys outside of Ontario.

Updated July 5, 2017



Current Yield 2%

BUY

EMPIRE COMPANY LTD. TSX-EMP.a

QUALITY RATING


Disclosures are lacking, as is with the typical Canadian retailer.

Empire only has two reporting segments: food retailing versus

investments and other operations (i.e. real estate), making it

difficult to assess results of the more significant food retailing

segment, especially Canada Safeway’s performance.


We expect Sobeys to achieve $500 million savings by the end of

F2020: $300 million savings from centralized procurement and

new pricing strategy; and $200 million from headcount reduc-

tion to eliminate duplication.


The issuance of debt to finance the Canada Safeway acquisi-

tion and the decline in EBITDA during the past two years in-

creased Empire’s lease-adjusted net debt-to-EBITDAR ratio from

2.0x to 3.0x in F2017. We expect Sobeys to realize savings from

Project Sunrise which should reduce its lease-adjusted debt-to-

EBITDAR ratio to 2.0x by F2019.


Sobeys has been plagued by a lack of discount format pres-

ence in regions most affected by the oil industry slowdown and

ineffective promotional strategies. Our grocery proprietary sur-

veys in Ontario during the past year showed that Sobeys has

reduced its regular prices and reliance on promotions. Together

with centralized procurement, we expect it will improve its gross

profit margin going forward.


Nine out of 14 Board of Directors members are independent

directors (64%). Out of the 271.7m common shares in total,

173.5m are non-voting Class A shares and the remaining 98.1m

are Class B voting common shares. The Sobeys family owns

33.4% of the shares outstanding while holding 100% of the vot-

ing rights.

INTRINSIC VALUE

We have derived a new $23.50 intrinsic value (up from

$21.00) for Empire using a F2020 net asset value model

and discounting the value to F2018 (year ending April 30,

2018); and a discounted cash flow model based on 10%

discount rate and 1.5% terminal growth rate. Empire re-

mains a BUY.

FY end April

(C$ Millions, except as noted) F2017E F2018E F2019E

Revenue

24,581

25,353

26,147

Gross Profit 5,935

6,215

6,553

Gross Profit Margin 24.15% 24.51% 25.06%

Food Retailing EBITDA

829

1,000

1,276

Food Retailing EBITDA Margin 3.37% 3.94% 4.88%

Other EBITDA

72

72

72

Total EBITDA

901

1,072

1,348

Total EBITDA Margin 3.67% 4.23% 5.15%

Share Price $22.06 $22.06 $22.06

Market Capitalization

6,026

6,026

6,026

EV

7,455

7,161

6,676

EV/EBITDA

8.3x

6.7x

5.0x

Shares Outstanding (millions)

271

271

271

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

HOWARD LEUNG


416-866-8783

D E - R I S K E D M A G N A E X P O S U R E L E A V E S G R A N I T E U N D E R V A L U E D Granite REIT specializes in the industrial subsector, benefitting from a key tenant relationship with Magna. In 2016, Granite

completed lease renewals and extensions for 28 properties, 15 of which were tenanted by Magna, including seven SPPs.

Having addressed its key tenant risk, we currently view Granite as overly discounted. Granite has a favorable operating

structure (triple-net leases) that resulted in one of the highest property operating margins in our universe, at 96.6%. Also, the

REIT has conservative leverage, a low payout ratio, and a disciplined growth strategy. We expect these trends to continue.


Prior Close C$51.97/US$39.64


Current Yield 5.0%

BUY

GRANITE REIT TSX-GRT.UN, NYSE-GRP.UN

QUALITY RATING


No accounting issues noted. The REIT has not reported AFFO

in the past as there was no set standard for the metric. But

now that REALPAC has put out a standardized guideline for

AFFO, the trust will begin reporting the metric in its Q1 2017

results.


By our estimates, Granite’s AFFO payout would have been

76%, which is on the low-end and is very conservative in our

view.


Granite is known for being very conservative with its capital

(some would say it is too conservative). Its leverage ratio,

which is debt divided by fair value of properties, is 25%.


Granite has a concentrated single-tenant relationship with

Magna, one of the world’s largest auto parts suppliers. 78%

of Granite’s annualized lease payments come from Magna.

However, Granite is starting to move away from relying on

Magna as its sole source of tenancy.

We also note that Granite does not have exposure to

Magna in Mexico anymore, mitigating potential fallout from

NAFTA renegotiations.


Performance goals are based on quantifiable metrics. With

the exception of the CEO, the board is independent. Three

activists have recently won board seats and we expect

them to drive Granite’s acquisition strategy.

INTRINSIC VALUE

Our estimate of F17 AFFO is $3.31 per unit. For the following three

years, we estimate a 3.5% annual growth rate, leading to an

estimate of $3.70 of AFFO per unit by 2020. We then apply a ter-

minal multiple of 15.5x to the REIT’s 2020 AFFO earnings. Discount-

ing the REIT’s AFFO by its cost of equity of 8.0% brings our intrinsic

value to $54 per unit.

Period Ending C$ Millions (except as noted)

F15 F16 Q1 F17

Unit price C$37.96 C$44.83 C$46.52

Units outstanding (‘000s) 47,017 47,123 47,144



Reported Debt to FV of Proper-

ties 23% 25% 24%

Revenue $216 $223 $55

Veritas Adjusted AFFO $148 $151 $39

Veritas Adj. AFFO Payout Ratio

(includes DRIP if applicable) 73% 76% 79%

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

NIMA BILLOU

nbi l lou@veri tascorp.com

416-866-8783

F R E E C A S H L E A V E S H U S K Y A H E A D O F T H E P A C K

After sustaining capital requirements of ~$2.3 billion in 2018 (our estimate), we expect the company to generate $1+ billion in free cash

flow at US$50 WTI, representing a free cash flow yield of 7.4% at today’s share price. Even factoring in an additional $900 million in growth

capital, we still see Husky eking out a cash surplus of $150 million next year at US$50 WTI. While the proverbial ‘popular kids’ Suncor and

Imperial continue to draw more attention, we prefer Husky’s discounted value and ability to navigate stagnant oil prices. BUY.




Current Yield 0%

BUY

HUSKY ENERGY INC. TSX-HSE

QUALITY RATING


Husky's Indonesian operations have run into IFRS 11 report-

ing restrictions requiring equity accounting. The partners

have rights to the net assets of a business arrangement (a

'joint venture'), which requires equity accounting, rather

than direct rights and obligations on the assets themselves

(a 'joint operation'), which would allow proportionate con-

solidation.


At US$51 WTI (our low case) 2017 operating cash flow per

share of $3.10-$3.20 per share and free cash flow per share

of ~$0.20. These cash flows and free cash flows increase in

2018 to ~$3.75 and ~$0.50 with US$55 WTI (our low case).

The Balance Sheet 3.5/5

Husky ended Q2-F17 with $5.9B of debt and $2.5 billion in

cash for a net debt position of $3.4 billion and $4.0B of un-

used credit on its borrowing facilities. Husky’s current net

debt is 1.1xt its funds flow at US$51 WTI in 2017, which is best

among its integrated peers.


Husky is diversifying away from its traditional Atlantic and

Western Canadian base with the startup of Liwan and Sun-

rise. Mid and Downstream EBITDA remains an outsized con-

tributor to overall operating income.


Husky is a creature of Li Ka-Shing who controls, directly and

indirectly, a 70.74% interest. His control and influence were

never more evident than with the April 25, 2016 $1.7 billion

sale of midstream assets to two entities controlled by Li Ka-

Shing.

Cash Flow and Distributions Q2 2017

(6 Mos.) 2016 2015

Reported CFO* 1,434.0 1,971.0 3,760.0

Capital expenditures (964.0) (1,705.0) (3,005.0)

Available cash (shortfall) 470.0 266.0 755.0

Dividends declared 0.0 0.0 1,181.0

% of CFO* 0% 0% 31%

% of available cash 0% 0% 156%

*CFO is cash from operations after working capital and asset retirement expenditures.

Company profile Q2 2017

(6 Mos.) 2016 2015

Price 15.01 16.29 14.05

Shares (millions incl. exch.) 1,005.5 1,004.9 1,005.5

Market cap. ($ millions) 15,092 16,370 14,127

Revenue ($ millions) 9,036 12,919 16,369

CFPS 1.43 1.96 3.74

Price to YTD CFPS 5.3x 8.3x 3.8x

ROE (annualized) -0.3% 5.4% -20.7%

Dividends per share 0.00 0.00 1.17

Production (000's boe/d) 327 321 346

CFO* per boe 48.10 16.81 29.80

Net debt to EV 19% 20% 32%

Net debt to CFO* 1.2x 2.1x 1.8x

INTRINSIC VALUE

Commodity Case WTI Oil Price

2017 / 2021

HH Gas Price

2017 / 2021

USD/CAD

2017 / 2021

Intrinsic

Value

$62 Oil Case 51 / 62 3.05 / 3.50 0.75 / 0.80 14.00

$67 Oil - Base Case 54 / 67 3.31 / 3.75 0.76 / 0.81 21.50

$77 Oil Case 57 / 77 3.50 / 4.00 0.77 / 0.85 32.50

Our base case values Husky at $21.50 per share, reflecting a return to

US$67 WTI oil and US$3.75 NYMEX gas through 2021.

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

KATHLEEN WONG


416-866-8783

Q 1 - 2 0 1 7 B E A T S D U E T O S U C C E S S I N T A R G E T E D P R I C E I N V E S T M E N T A N D E X P C O N T R O L

Loblaw’s Q1-2017 adjusted EBITDA increased 4.3% to $864 million, better than consensus of $843 million. Loblaw

targeted price investment in Q1-2017 continued to drive strong traffic which offset the negative impact of food

price deflation. This was the third consecutive quarter that Loblaw demonstrated success with this strategy. April

2017 should be the last month we experienced food price deflation and the Canadian grocers should have easier

comparison from May 2017 onwards and we expect Loblaw to generate positive SSSG in the next few quarter.

Loblaw has become more promotional during our grocery price surveys in January and April 2017. Going forward,

we expect Loblaw continues to experience a slight GPM decline but the retail GPM should remain stable in the

26% range. Loblaw demonstrated strong expense control during the past several quarters and this had helped to

more than offset the GPM decline.

Updated May 5, 2017



Current Yield 1.4%

BUY

LOBLAW COMPANIES LTD. TSX-L

QUALITY RATING


Loblaw began reporting the sales and profitability of its retail

segment and financial services segment beginning in Q1-2011.

We are looking for more detailed disclosure on the perfor-

mance of Shoppers Drug Mart versus legacy food retail.


Free cash flow should improve as IT spending gradually declines

to less than 1% of sales by 2016. Loblaw will also benefit from the

higher-margin Shoppers Drug Mart business and related opera-

tional synergies.


The acquisition of Shoppers increased lease adjusted net-debt-

to-EBITDAR ratio from 1.3x to 3.1x, which is still within the lever-

age ratio range of DBRS’ BBB credit rating. The company has

since paid down $1.9m, and has employed free cash flow to-

wards dividend increases and share buybacks.


Grocery is a mature industry and the acquisition of Shoppers

Drug Mart will help Loblaw to benefit from the aging de-

mographics and the strong growth of generic drugs. Loblaw

should realize benefits from SAP system implementation in areas

of improved store inventory management during 2016.


Loblaw’s Board of Directors consists of a majority of independ-

ent directors, with 10 out of 13 considered independent (77%).

Unlike the majority of Canadian retailers, Loblaw does not have

a typical dual class voting structure. The issuance of shares to

finance the acquisition of Shoppers reduced George Weston’s

interest in Loblaw from 62.8% to 46.0% in late 2013.

INTRINSIC VALUE

We have incorporated the better-than-expected Q1 results in our

model and derived a new NAV of $85.00 (up from $80.00). Our $85.00

intrinsic value of Loblaw consists of $72.00 from Retail, $2.00 from Fi-

nancial Services and $11.00 from the 82.7% interest in Choice Proper-

ties REIT. Loblaw remains a BUY

FY end December (C$ Millions, except as noted)

2016 2017E 2018E

Consolidated Revenue 46,385 47,861 49,486

Consolidated EBITDA (Adj.) 3,852 3,938 4,030

Consolidated EBITDA Margin 8.30% 8.23% 8.14%

Loblaw Food Retail Adj EBITDA 2,125 2,181 2,250

Loblaw Food Retail EBITDA Margin 6.41% 6.39% 6.36%

Shoppers Drug Mart EBITDA

1,506 1,530 1,542

Shoppers Drug Mart EBITDA Margin 12.33% 12.08% 11.83%

Share Price $71.05 77.56 77.56

Market Capitalization 29,067 31,730 31,730

EV $39,162 $41,053 $39,813

EV/EBITDA 9.9x 10.4x 9.9x

Shares Outstanding (millions) 401 399 399

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

MIKE RIZVANOVIC

mrizvanovic@veri tascorp.com

416-866-8783

S T E A D Y A S S H E G O E S

MFC reported core EPS of $0.53 in Q1, which met the Street’s expectations. Core ROE improved meaningfully from 9.3% last year to 11.1%, while

MFC’s quarterly dividend was left unchanged at $0.205/share. The company’s business in Asia continues to flourish largely on the back of improved

distribution, while the U.S. business rebounded due to record gross flows within wealth and favorable policyholder experience. Our thesis on MFC

has not changed coming out of the quarter; we continue to expect gradual improvement in both core earnings and ROE, as the benefits of strong

sales and higher interest rates make their way into results. Both our BUY recommendation and intrinsic value estimate of $27.00 remain unchanged.

Updated May 12, 2017

Current Price C$23.92 / US$17.46


Current Yield 3.4%

BUY

MANULIFE FINANCIAL CORP. TSX-MFC NYSE-MFC

QUALITY RATING


MFC met its ROE target of 13% in Q1 2017 with a 13.7% result.

Accounting charges did weigh on earnings as a flattening

yield curve led to modest gains in Japan on the valuation of our

policy liabilities.

Capital 4/5

The company’s capital position remained strong with MLI’s

MCCSR ratio ending the quarter at 233%, unchanged from the

prior year.


MFC’s direct exposure to oil & gas as part of its Alternative

Long-Duration Assets portfolio is $2.1 billion (0.7% of total

invested assets) in Q1. Other O&G exposure include $14.4 billion

(8%) of fixed income exposure per MFC’s disclosure in Q1-F17.


Earnings growth relative to the prior year period was particularly

strong in the U.S. and Asia at 37% and 14%, respectively. The U.S.

business benefitted from many factors such as favorable

policyholder experience, including changes to claim

assumptions in the long-term care business, and higher fee

income in wealth and asset management (WAM). Asia’s

growth of 14% (on a constant currency basis) was driven by

robust new business volumes as well as further progress on

expanding MFC’s distribution capabilities in the region.


No issues noted.

INTRINSIC VALUE

Our intrinsic value of $27.00 incorporates a multiple of 1.3x on our

F2017 BV/share estimate of $21.06.

BUSINESS COMPOSITION Excluding Corporate and Other, 38% of MFC’s Q1 F2017 core

earnings was generated in Asia, 29% in Canada, and 47% in U.S.

FY end Dec. 31 C$

F14 F15 F16

Share price (at end of period) 22.18 20.74 23.91

Book value / share 16.42 19.51 19.37

P:BV 1.4x 1.1x 1.19x

MCCSR (of Canadian subsidiary) 248% 223% 230%

Core ROE 9.8% 9.2% 12.9%

Dividend yield 2.8% 3.6% 3.1%

Reported core EPS (TTM) 1.48 1.68 1.96

Core P:E 15.0x 12.3x 10.6x

Market capitalization ($B) 41.3 40.9 47.2

# of shares O/S ($M) 1,864 1,971 1,975

AUM ($B) 691 857 894

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

AHMAD FAHEEM

afaheem@veri tascorp.com

416-866-8783

M A P L E L E A F A N G L E S F O R G R O W T H Maple Leaf Foods produced the fifth consecutive quarter of double digit EBITDA margins (10.8% in Q1-F17), there is now plenty of

evidence that the company can run its modernized plant network at an attractive scale. While management’s latest five-

year target of 14% to 16% Adj. EBITDA margins is likely to face many challenges, Maple Leaf may yet surprise investors with

gains from product development and branding efforts, escaping its current positioning in relatively mature protein

markets. We remain buyers of this name.

Updated May 4, 2017



Current Yield 1.3%

BUY

MAPLE LEAF FOODS INC. TSX-MFI

QUALITY RATING


The bulk of Maple Leaf’s ‘provisions’ account has now be-

come current ($14.0 MM of $26.1 MM at the end of Q3).

Provisions primarily relate to severance and site closing

costs tied to Maple Leaf’s plant restructuring.


We expect Maple Leaf to generate about $234 MM of free

cash flows in 2017, after $110 MM of sustaining capital with

a similar level (+/- $10 MM) likely in 2018 and $259 MM of

free cash in 2018.


At the end of Q1, Maple Leaf had ~$2.83 per share in net

positive working capital on its books, after debt, provisions

and other liabilities. This included $1.08 per share in cash.


In our view, primary margins (sales less inventory costs)

should normalize near 24% of sales in 2017, with SG&A and

non-inventory costs reduced to ~$448 million net of D&A,

just over 13% of sales.


The modernization of Maple Leaf’s supply chain leaves

management with no more excuses. Continued operation-

al execution is a crucial test of Mr. McCain’s leadership and

so far results have been good.

INTRINSIC VALUE

Our updated valuation of $35.50 a share incorporates 11.6%

EBITDA margins in 2018, with $3.5 billion in sales and a 10.3 times

Enterprise Value to EBITDA multiple.

FY end Dec. 31 C$ Millions

F15 F16 LTM,

Q1-F17

Price 23.76 27.65 29.11

Shares outstanding, millions 135.0 136.3 132.7

Market capitalization 3,207.6 3,670 3,862

Debt (cash) net of working capital

and selected long-term liabilities (456.1) (558.5) (375.3)

Enterprise value 2,751.5 3,210.2 3,486.7

Revenue* 3,292.9 3,331.8 3,346.1

EBITDA (adjusted) 219.8 343.4 349.9

EPS (adjusted) 0.58 0.93 0.99

P/E multiple (TTM adjusted) 41.0x 29.7x 29.4x

EV / Adj. EBITDA (TTM) 12.5x 9.3x 10.0x

Quality Scale


5 10 15 20 25

Intrinsic Value Scale -50% -25% 0 25% 50%

KATHLEEN WONG


416-866-8783

Q 2 - F 2 0 1 7 B E A T S D U E T O E F F E C T I V E

M E R C H A N D I S I N G A N D P R O M O T I O N A L S T R A T E G Y

Q2-F2017 SSSG of +0.3% was impressive despite a tough comparison of +5% in the same quarter last year and a

deflationary environment. Metro’s Q2 results were in line with the observations from our January 2017 grocery price survey

in Ontario. Metro has a track record of using an effective promotional strategy to drive positive SSSG. Despite the

aggressive promotions, Metro had the right merchandise mix that drove gross profit margin improvement in Q2-F2017.

In this report, we show the detail results of our Apr 2017 grocery price survey in Ontario. We believe Metro’s effective

discounting strategy should bode well in a deflationary environment.

Updated April 26, 2017



Current Yield 1.4%

BUY

METRO INC. TSX-MRU

QUALITY RATING


Metro no longer provides any metrics for the core grocery

retailing segment versus the higher-margin Premiere Mois-

son and Marche Adonis businesses. Similar to peers, there is

also a lack of disclosure on results by banner and/or region.


Metro’s return on equity was more than 14.5% over the last

20 years. Management has been using more than 50% of its

annual free cash flow to buy back stock in the last few

years. Metro’s latest dividend increase (in January 2017)

was the 23td consecutive year of dividend growth.


Lease-adjusted net debt/EBITDAR as of Q2-F2017 sat at 2.3x,

showing consistent improvement since F2005 (3.5x) when

Metro acquired A&P Canada. Further, Metro holds about

$2 billion worth of Alimentation Couche-Tard shares that

may be liquidated if needed.


After the acquisition of A&P Canada in 2005, Metro consoli-

dated its five banners in Ontario into the Metro brand and

simplified its operating structure. Following the success of

the revamped merchandising program at Food Basics

stores since 2013, Metro rolled out a similar program for its

Super C banner. A consistent focus on improving fresh offer-

ings and effective promotional programs have helped Met-

ro improve store traffic and tonnage.


Metro’s Board of Directors consists of a majority of inde-

pendent directors, with 12 out of 13 independent.

INTRINSIC VALUE

We have incorporated the better-than-expected Q2-F2017 results

in our model and increased our intrinsic value to $51.00 (up from

$48.00). Excluding the value of the Couche-Tard shareholding,

this implies that we value Metro’s grocery operations at about

11x F2018E EBITDA. The much higher EBITDA margins at Metro

justifies the premium valuation over its peers.

FY end September (C$ Millions, except as noted)

F2016 F2017E F2018E

Fully-Diluted EPS $2.39 $2.50 $2.65

Revenue 12,788 13,168 13,552

EBITDA (excluding equity-accounted earnings from Couche-Tard)

931 975 1,007

EBITDA Margin 7.28% 7.50% 7.48%

Share Price $41.80 $45.18 $45.18

Price/Earnings 16.6x 17.3x 16.4x

Price/Book 3.3x 3.5x 3.2x


EV 10.994 10,180 10,786


Shares Outstanding (millions) 239.3 225.5 219.0

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

NASIBA AKHMEDOVA

nakhmedova@veri tascorp.com

416-866-8783

S T R A T E G I C R E V I E W U N C E R T A I N T Y & O N T A R I O A S S E T S

W E I G H O N N P I Bloomberg article suggests the deal has fallen apart. Taken together, following the expiry of Iroquois Falls’ new dispatch sales agreement

in F22, the net impact of these items reduces our price target from $27.00 to $25.00 per share, with our revised target representing

approximately 10% upside to the current share price.


Current Price $22.81


Current Yield 4.7%

BUY

NORTHLAND POWER INC. TSX-NPI

QUALITY RATING


Compared to BEP.UN, NPI’s FCF disclosure is conservative,

since it accounts for debt repayments on active wind

farms.


Although, lower cash flow from Kingston and robust devel-

opment plans do not leave much room for a dividend in-

crease in F17, our analysis shows that once the European

wind farms commence operations, NPI should have suffi-

cient free cash flow to increase the dividend by 8%, to $1.17

per share.


The decline in cash flow from Kingston will negatively im-

pact Northland’s corporate level credit metrics. However,

since Northland employs project level financing under-

pinned by long-term sales agreements/subsidies, it should

have ample access to debt capital.


Gemini windfarm achieved full completion ahead of

schedule and under its total budget. In addition, Nordsee

One continues to progress as planned, with 14 turbines in-

stalled to date.


No issues noted.

INTRINSIC VALUE

We reduced our value estimate for NPI from $27.00 to $25.00 per

share.

FY end Dec. 31 C$ Millions Q1-F17 F16 F15

Share price $24.56 $23.30 $18.66

Shares o/s (millions) 184.4 186.6 169.6


Long-term investments $50.4 $50.3 $0.0

Net debt and preferred shares $6,099 $6,017 $5,923

Enterprise value $10,628 $10,364 $9,088

Revenue (TTM) $1,284.9 $1,099.0 $728.1

Free cash flow (TTM) $239.0 $242.3 $182.2

Avg. units o/s (TTM, millions) 173.1 172.9 183.7

Cash flow per share (TTM) $1.3 $1.3 $1.1

Price-to-free cash flow (TTM) 18.9x 17.9x 17.4x

Payout ratio (TTM) 83% 83% 101%

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DESMOND LAU

dlau@veri tascorp.com

416-866-8783

P O S I T I V E O U T L O O K D E S P I T E N E T N E U T R A L E R A With the recent CRTC ruling on net neutrality banning the use of data cap exemptions on content, a key differentiating

tool in Videotron’s arsenal was decommissioned. Despite the setback, we have reason to believe wireless will continue to

deliver results. Staying the strategic course has served Quebecor’s shareholders well, and continues to yield solid

performance, led by steady gains in wireless subs of 27k all while ARPU drove higher to $52.49. On the cable front, internet

sub growth improved 3.2% over the prior year with the addition of 15k customers. Declines in TV subs remained stable at -

2.4%, well above peers (Rogers and Shaw) while ARPU remained flat at $49.73. Finally, a debt refinancing helped reduce

the cost of debt by more than 200bps on $625 million of principal.




Current Yield 0.5%

BUY

QUEBECOR INC. TSX-QBR.b

QUALITY RATING


Disclosures are improving, with management providing

wireless EBITDA figures for FY16, allowing for greater clarity

over performance.


Improving wireless profitability, continued cable EBITDA

growth and the completion of LTE capex in 2016 will help

increase free cash flow over time.

The Balance Sheet 2.5/5

Net debt: EBITDA sits at 3.3x after Quebecor increased its

QMI stake from 75% to 81%.


Wireless continues to drive growth, with 27k net additions,

and ARPU increasing 5.8% to $52.49. Video net losses of 10k

were manageable and Internet adds of 15k were better

than the 10k a year ago.


The rights of Class B shareholders are limited due to a com-

bination of a dual class share structure and the Caisse’s

ownership (includes veto rights for dividend increases, ac-

quisitions and the right to force an IPO of QMI by 2019).

INTRINSIC VALUE

We are maintaining our BUY rating and updating our intrinsic val-

ue estimate to $45.

YTD Mar 31, 2017 C$ Millions

F15 F16 F17

Revenue (TTM) $4,027 $3,929 $4,038

EBITDA (TTM) $1,458 $1,456 $1,505

Share price (reporting date) $33.05 $36.11 $41.53

EV/EBITDA (TTM) - proportionate 8.1x 8.3x 7.7x

Dividend yield 0.3% 0.5% 0.4%

Market capitalization 4,059 4,420 4,895

Enterprise value 10,011 10,555 10,374

QMI Net debt: TTM EBITDA 3.2x 3.5x 3.3x

Wireless subscribers (thousands) 662 796 921

Wireless ARPU $46.03 $49.61 $52.49

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DESMOND LAU


416-866-8783

S U B G R O W T H I N T H E G R E E N Shaw added ~13k TV subs this quarter, marking the first time in five years that the Company has generated positive TV

growth. The customer improvement has been much faster than anticipated, especially when compared to Comcast’s

trajectory (X1 launched 4 years before growing TV subs). Shaw’s pro-forma leverage ratio of 1.9x is now lowest amongst

peers, but we are not expecting dividend increases until at least 2019, given the $350m in incremental wireless capex to

be spent in F18. Nevertheless, a more complete handset offering, better network coverage and the ability to bundle a

rebranded wireless product are positive catalysts to come.


Current Price C$30.14/US$23.13


Current Yield 3.9%

BUY

SHAW COMMUNICATIONS INC. TSX-SJR.b; NYSE-SJR

QUALITY RATING


Good aside from revenue smoothing of 2-year promo plans

and capitalization of equipment subsidies, compared to

expensing by peers.


Dividend increases will be on hold for a few years, as Shaw

builds out its LTE network. The company also loses about

$260M in FCF from the media sale, but is comfortable with a

high payout ratio (100% with DRIP).


Following the sale of ViaWest for $2.3b, Shaw’s pro-forma

net debt-to-EBITDA decreased to 1.9x, which is the lowest in

the industry.


With BlueSky TV and Gigabit internet rolled out to its entire

footprint, investments are now bearing fruit, yielding strong

Consumer segment sub growth. Further investment to im-

prove the LTE network is expected to enhance Wireless

performance down the line.


The Shaw family continues to effectively control the com-

pany through ownership of 79% of the multiple voting

shares.

INTRINSIC VALUE

We are maintaining our BUY and increasing our intrinsic value

estimate to $31.50.

YTD May 31, 2017 C$ Millions

F15 F16 F17

Revenue (TTM) ex. media 4,329 4,670 5,234

EPS (TTM) 1.62 2.76 1.06

EBITDA ex. media 1,996 2,090 2,178

Share price (at reporting) $27.83 $24.86 $30.14


FCFE Yield (TTM) 5.8% 4.2% 4.0%

P/E (TTM) 17.2x 9.0x 28.4x

Market cap 13,122 12,017 14,870

Enterprise Value 18,757 17,586 19,452

Net debt: TTM EBITDA 2.3x 2.5x 2.5x

Dividend Yield 4.0% 4.8% 3.9%

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DESMOND LAU


416-866-8783

T E L U S S O O N T O H A R V E S T W H I L E B C E N E E D S T O G R O W

Since 2010, Telus has deployed its resources aggressively, with consistent 10% annual dividend increases as well as

investments to build out fibre directly to customer households. Telus’ fibre-to-the-home investments will cover a

considerable portion of its footprint by the end of the year, with the company expected to return to free cash flow growth

in 2018. Yet its shares now trade at a meaningful discount to large-cap peers. With Telus approaching a position to harvest

those investments, we are upgrading our recommendation on Telus to a BUY with a $50 intrinsic value estimate.


Current Price C$45.21 / US$ 33.23


Current Yield 4.2%

BUY

TELUS CORP. TSX-T; NYSE-TU

QUALITY RATING


Accounting and disclosures are reasonable.


We estimate that Telus will pay out about 105% of F17E and

96% of F18E free cash flow, respectively.


The net debt-EBITDA ratio of 3.0x sits outside of the 2.0-2.5x

target and will limit the extent of share buybacks that can

be done in the future (management is targeting $250M per

year through 2019).


Wireline subscriber were slightly slower than a year ago,

with 7k TV adds vs 11k in Q1-16. Wireless ARPU grew 3.9%,

while churn was down 4bps.


Good.

INTRINSIC VALUE

We are upgrading our recommendation to a BUY with a $50 in-

trinsic value estimate.

YTD Mar 31, 2017 C$ Millions

F15 F16 F17

Revenue (TTM) 12,135 12,582 12,889

EPS (TTM) $2.39 $2.25 $2.16

EBITDA (TTM) 4,274 4,264 4,350

Share price (reporting date) $42.80 $39.63 $45.21


P/E (TTM) 17.9x 17.6x 20.9x

FCFE yield (TTM) 4.0% 3.9% 0.9%

Dividend Yield 3.7% 4.6% 4.2%


Enterprise value $35,905 $35,875 $39,773

Net debt: TTM EBITDA 2.3x 2.9x 3.0x

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

KATHLEEN WONG


416-866-8783

Q 1 - F 2 0 1 8 I N L I N E ; B I L L 8 1 S T I L L A N O V E R H A N G

Jean Coutu’s Q1-F2018 Pro Doc was very soft due to the removal of cap on professional allowances (“PAs”) of generic drugs. However,

the Pro Doc softness was partly offset by the strong results from the franchising segment.

We have reduced our F2018E and F2019E Pro Doc EBITDA based on the higher-than-expected PAs that Pro Doc is paying. On April 12,

2017, the Quebec government announced that it will modify the regulation to restore the 15% cap on PAs. We expect the 15% cap to be

reinstated beginning in Q2-F2019 (i.e. June 2018). We continue to expect the elevated SG&A expense level to roll off when all shipments

will be made from the Varennes distribution centre beginning in October 2017.




Current Yield 2.3%

BUY

THE JEAN COUTU GROUP (PJC) INC. TSX-PJC.a

QUALITY RATING


Disclosures are on par with those of other Canadian retailers

across the board. Jean Coutu reports Pro Doc as a separate

segment.


Cash flows are positive and stable, and should grow at a

steady pace. Free cash flow increased from $119m in F2016 to

$187m in F2017 largely due to investment in a new, larger distri-

bution centre in the previous year.


Jean Coutu has a strong balance sheet with no debt and

$179m in cash at the end of Q4-F17. Book value of Jean

Coutu’s land and buildings was about $422 million at the end of

F2017 and management has previously indicated that the mar-

ket value of its owned real estate is more than $500 million be-

fore considering the new DC (~$190m investment in total), in-

cluding $30 million worth of surplus real estate. Therefore, Jean

Coutu has access to capital by either crystallizing the value of

its real estate or levering up its balance sheet.


Jean Coutu is the number one pharmacy player in Quebec

and benefits from aging demographics. Pro Doc (generic drug

manufacturer acquired by Jean Coutu in 2007) is the key profit

driver and will help to mitigate the negative impact of recent

drug reforms. Pro Doc’s EBITDA margin is 25%+ even after lower

generic drug prices from competitive tendering, much higher

than the 6.50% regulated mark-up for prescription wholesaling.


The Jean Coutu family controls about 93% of the votes with 57%

of outstanding equity through owning 100% of Class B shares

having 10 votes per share. Should the Jean Coutu family cease

to be the beneficial owner of at least 50% of the outstanding

votes, the Class B shares will revert back to one vote per share.

Ten out of 15 directors (67%) are independent.

INTRINSIC VALUE

We have derived a new $24.00 intrinsic value (down from $25.00) for

Jean Coutu using a net asset value model. Our lower intrinsic value

reflects the higher-than-expected PAs that Pro Doc will have to pay in

the next few quarters before the Quebec government reinstates the

15% cap on PAs. Note that our intrinsic value has also included an

estimated negative impact of Bill 81.

FY end February (C$ Millions, except as noted)

F2017

(2016)

F2018E

(2017E)

F2019E

(2018E)

Fully-Diluted EPS $1.08 $0.87 $1.16

Retail Sales 4,474 4,505 4,614

Revenue 2,978 2,921 3,008

Franchising EBITDA 240 240 256

Pro Doc EBITDA 71 14 63

Total EBITDA 311 254 320

EBITDA Margin 10.45% 8.78% 10.72%

Share Price $20.05 $20.10 $20.10

P/E 18.5x 17.3x 14.7x



Shares Outstanding (millions) 184 180 175

Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DARRYL MCCOUBREY


416-866-8783

F I N I S H I N G S T R O N G : T R P D E L I V E R S S O L I D Q 4 R E S U L T S &

A P R O M I S I N G O U T L O O K We continue to rate TransCanada a BUY because of its unique combination of income and value attributes. Our $67.50 per share value

estimate implies a 7.5% F20E FCF yield, which is underpinned by a portfolio of low-to-medium risk growth projects.

Updated February 17, 2017

Current Price $62.22


Current Yield 4.0%

BUY TRANSCANADA CORP. TSX-TRP; NYSE - TRP

QUALITY RATING


Compared to its most similar peer, Enbridge Inc., we find

TRP’s disclosure to be slightly better, since it offers a more

granular look (i.e. EBITDA and earnings vs. only adjusted

earnings at ENB) into the assets that make up its reporting

segments.


With its major capital projects commencing operations in

the coming years, we expect TRP’s operating cash flow to

increase markedly, granting it significant capacity to fund

future growth projects and to increase the dividend.


Like most other regulated Canadian businesses, TRP is bene-

fiting from the current low interest rate environment, with

ample access to debt capital. The unexpected equity

issuance in November will improve leverage metrics.


Results from TRP’s Alberta power assets has declined along-

side spot power prices, but with a mostly gas-fired genera-

tion fleet, we believe TRP is relatively well positioned to ride

out new climate change initiatives.


No significant issues noted.

INTRINSIC VALUE

Our value estimate is now $67.50 per share.

For the Period Ended

(Amounts in C$) F16 F15 F14

Share price $60.54 $45.19 $57.10

Shares (millions) 864 703 709




Adjusted EBITDA (TTM) $6,647 $5,908 $5,521

Adjusted EPS (TTM) $2.78 $2.50 $2.42

EV / EBITDA (TTM) 16.1x 11.9x 13.1x

P/E (TTM) 21.8x 18.1x 23.6x


Quality Scale


5 10 15 20 25


-50% -25% 0 25% 50%

DARRYL MCCOUBREY


416-866-8783

A S H O P P I N G S P R E E I S O N T H E H O R I Z O N While we don’t typically ascribe value to unannounced transactions, a strong indication of M&A activity combined with its history of

successful integration and improvement of acquired businesses warrants an exception for WCN. With significant capital available to

deploy (over $2 billion of discretionary cash generated by the end F18), we believe


Current Price US$66.00

Intrinsic Value US$72.50

Current Yield 0.7%

BUY

WASTE CONNECTIONS INC. NYSE-WCN

QUALITY RATING


The control deficiency reported in WCN’s 10K is immaterial,

and will not impact core EBITDA, EPS or free cash flow.

WCN’s peers. While we’d like more detail on operating

expense and SG&A, excluding a “core price” disclosure

that isn’t adjusted for rollbacks.


The BIN acquisition continues to pay dividends. Literally.

We believe WCN is capable of hiking its dividend by almost

20% in October, due to robust FCF generation.


WCN’s leverage is essentially at the midpoint of its peer

group. However, WCN’s track record of margin improve-

ment and FCF conversion suggest the organic business’

debt service capability is above average.


Operating conditions remain strong in the North American

waste management sector, with growing volume reducing

risk of price competition.


Integration is ahead of schedule, boosting our confidence

that WCN can generate additional value accretion

through prospective M&A.

INTRINSIC VALUE

Our $72.50 per share estimate is $2.50 per share higher on ac-

count of assumed prospective M&A value creation.

Period Ending US$ Millions

Q2-F17 F16 F15

Share price $64.42 $78.59 $56.32

Shares outstanding (millions) 263.4 175.4 122.4


Net debt $3,755 $3,819 $2,157


Revenue (TTM) $4,401 $3,376 $2,117

EBITDA (TTM) $1,374 $1,071 $711

Adjusted EPS (TTM) $2.27 $1.98 $1.98


EV-to-EBITDA (TTM) 15.1x 16.4x 12.7x

Documents

THE LIST Veritas ' Model Portfolio...Telus Corp. T 24-May-17 $45.47 $50.00 4.3% 18.0 The Jean Coutu Group Inc. PJC/A 24-Jun-15 $20.76 $24.00 2.5% 16.0 TransCanada Corp. TRP 16-Dec-15