Morning Pulse

OCTOBER 20, 2017

TARGET/ESTIMATE CHANGES Express Pulse released yesterday 3 AltaGas Ltd. (ALA, Hold, Average Risk, Target C$29.00) Cenovus, Encana, IGM, Pattern 3Q results; larger-than-expected dividend boost pleases investors Energy, Rogers 4 Cenovus Energy Inc. (CVE, Buy, Above-average Risk, Target C$14.00) Desjardins upcoming events Palliser sale; three of four done, but (much) more to go Toronto 5 Dream Industrial Real Estate Investment Trust (DIR.UN, Hold, Average Risk, Oct-24 Calian Target C$9.50↑) Oct-24 25 Kristopher Zack Brian Pauls joins the Dream team Montréal 6 Rogers Communications Inc. (RCI.B/RCI, Hold, Average Risk, Target C$67.50↑) Oct-30 Yamana Gold Nov-3 SNC-Lavalin Increased profitability fuels additional capex Calgary/Edmonton Oct-25 26 Doug Young INDUSTRY COMMENTS Vancouver/Victoria 7 Oil & Gas Oct-23 24 Doug Young Natural Gas Report—supportive injection lost in noise of mild winter outlook Houston Oct-25 Leucrotta Click on company/sector for a summary or on icon to link to full document See following page for details

Earnings calendar coverage companies Oct-24: CNR (4pm) Oct-26: HSE (bef mkt), MEG, SJR.B, TFII (aft mkt) Oct-27: IMO Oct-30: VET (4am) Nov-1: AP.UN (aft mkt), BEP.UN (7am), GSC (aft mkt), MR.UN (aft mkt), WCP (aft mkt) Nov-2: BBD.B (bef mkt), BCE, BNP, CCA (aft mkt), CVE, ENF (bef mkt), GWO, IGM, KL (bef mkt), PPL (aft mkt), SAP, SNC (bef mkt), VII (bef mkt) Nov-3: TOG (bef mkt)

DESJARDINS RESEARCH www.desjardins-securities.ca www.thomsononeanalytics.com http://thomsonreuters.com/financial/ Bloomberg: DSER

This report was prepared by an analyst(s) employed by Desjardins Capital Markets and who is (are) not registered as a research analyst(s) under FINRA rules. Please see disclosure section on pages 8–11 for company-specific disclosures, analyst certification and legal disclaimers. 1

OCTOBER 20, 2017

Desjardins Upcoming Events

TORONTO Calian Group Ltd.—Kevin Ford, President & CEO October 24 Kristopher Zack, Oil & Gas Analyst October 24–25 Stingray Digital Group Inc.—Eric Boyko, President, CEO & Founder/Mathieu Péloquin, November 10 Senior Vice-President, Marketing & Communications/Jean-Pierre Trahan, CFO Manulife Financial Corporation—Steve Finch, Executive Vice-President, Chief Actuary/ November 16 Robert Veloso, Vice-President, Investor Relations Mosaic Capital Corporation—Mark Gardhouse, CEO/Cam Deller, Vice-President, November 21 Corporate Development

MONTRÉAL Yamana Gold Inc.—Peter Marrone, Chairman & CEO/Steve Parsons, Senior Vice-President, October 30 Investor Relations & Corporate Communications SNC-Lavalin Group Inc.—Neil Bruce, President & CEO/Sylvain Girard, Executive Vice-President November 3 & CFO/Denis Jasmin, Vice-President, Investor Relations Manulife Financial Corporation—Steve Finch, Executive Vice-President, Chief Actuary/ November 15 Robert Veloso, Vice-President, Investor Relations Pine Cliff Energy Ltd.—Philip Hodge, President & CEO November 16 Calian Group Ltd.—Kevin Ford, President & CEO/Jacqueline Gauthier, CFO & Corporate Secretary November 21 AGF Management Limited—Kevin McCreadie, President & CIO/Adrian Basaraba, December 7 Senior Vice-President & CFO/Paul Francis, Corporate Development & Investor Relations Dollarama Inc.—Michael Ross, CFO December 8

CALGARY/EDMONTON Doug Young, Banks & Insurance Analyst October 25–26

WINNIPEG Manulife Financial Corporation—Steve Finch, Executive Vice-President, Chief Actuary/ November 14 Robert Veloso, Vice-President, Investor Relations Doug Young, Banks & Insurance Analyst December 14

VANCOUVER/VICTORIA Doug Young, Banks & Insurance Analyst October 23–24 Manulife Financial Corporation—Steve Finch, Executive Vice-President, Chief Actuary/ November 13 Robert Veloso, Vice-President, Investor Relations

BOSTON Dollarama Inc.—Michael Ross, CFO December 1 AGF Management Limited—Kevin McCreadie, President & CIO/Adrian Basaraba, December 6 Senior Vice-President & CFO/Paul Francis, Corporate Development & Investor Relations

HOUSTON Leucrotta Exploration Inc.—Robert Zakresky, President & CEO October 25

MINNEAPOLIS/CHICAGO InterRent Real Estate Investment Trust—Brad Cutsey, President/Curt Millar, CFO November 20–21 For additional information, please contact your institutional salesperson, Angela Di Pede (416) 867-1952, [email protected] or Christine Katona (416) 867-2262, [email protected]

2 OCTOBER 20, 2017 Target/estimate changes AltaGas Ltd.

Justin Bouchard, P.Eng., CFA • (403) 532-6615 • [email protected] Zaakir Karim, CFA, Associate • (403) 532-6625 • [email protected] Petur Radevski, Associate • (403) 532-6601 • [email protected]

Rating: Hold, Risk: Average, Target: C$29.00 ALA C$29.54, TSX

3Q results; larger-than-expected dividend boost pleases investors

The Desjardins Takeaway AltaGas reported solid 3Q results, with adjusted EBITDA ahead of consensus, driven primarily by Click here for full document stronger-than-expected results in its gas segment. However, the real crowd pleaser was the 4.3% dividend increase, which was larger than expected—and ALA is expected to increase the dividend again Key changes in mid-2018 (once the WGL acquisition closes). That said, we continue to view the stock as fairly valued Norm EBITDA (C$) at current levels. 2017E Old 771 New 791↑ 2018E Old 776 Highlights New 847↑ AltaGas reported normalized 3Q EBITDA of C$190m, ahead of consensus of C$179m. Relative to our Norm FFO/sh estimate of C$174m, the EBITDA beat was primarily attributable to wider-than-expected frac spreads 2017E Old 3.49 and higher-than-estimated equity income from Petrogas. New 3.52↑ Payout ratio (%) 2017E Old 75 ● Dividend boost ahead of our expectations. ALA increased the dividend to C$2.19/share (from C New 77↑ $2.10/share) on an annualized basis, an increase of ~4.3% (we were looking for an increase of 2.9%). 2018E Old 79 Given AltaGas’s annualized dividend growth guidance of 8–10% to 2021 (contingent on closing the New 73↓ WGL acquisition), we anticipate another dividend increase in mid-2018. Source: Desjardins Capital Markets

● North Pine NGL separation facility trending below budget and ahead of schedule. The first train of the facility (10 mbbl/d) is expected to be completed in December 2017 (ahead of the original schedule of 1Q18) and cost C$100–110m (below the initial budget of C$120m).

● The WGL acquisition remains on track; ALA launches first phase of asset dispositions. AltaGas continues to expect the WGL acquisition to close in mid-2018. As part of its plan to finance the acquisition, AltaGas has launched the first phase of its asset sale process (which it expects will be completed in early 2018), which includes Blythe and the Tracy facility in California (additional asset sales may be undertaken in 2018).

Valuation We reiterate our C$29 target, which is derived through a blended valuation of our DCF (C$35/share) and a sum-of-parts valuation (C$23/share).

Recommendation We reiterate our Hold–Average Risk rating.

3 OCTOBER 20, 2017 Cenovus Energy Inc.

Rating: Buy, Risk: Above-average, Target: C$14.00 CVE C$12.51, TSX/CVE US$10.01, NYSE

Palliser sale; three of four done, but (much) more to go

The Desjardins Takeaway Cenovus’s sale of the Palliser asset (in conjunction with the sale of Pelican Lake and Suffield in 3Q) has Click here for full document removed many of the risks around the divestment strategy and reduced balance sheet risk, and thus represents a clear step in the right direction. Nevertheless, uncertain commodity prices, still elevated Key changes debt levels, high breakeven prices (relative to peers), 208m shares off lock-up on November 17 and DACF (C$m) uncertainty around the Deep Basin strategy remain headwinds to the story. 2017E Old 3.4b New 3.3b↓ 2018E Old 3.9b Highlights New 3.6b↓ Over the past five months, the execution of Cenovus’s C$4–5b divestment strategy (and with it the Ttl prd (mboe/d) company’s opportunity to rightsize the balance sheet) has been front and centre on the minds of 2017E Old 461 investors. The Palliser disposition gives CVE ~C$2.8b for its first three asset sales, which is ahead of our New 446↓ 2018E Old 590 estimated mid-point for these assets (C$2.4b) and suggests the company will likely close toward the low New 534↓ end of the target range for its four legacy conventional assets. As a result, we believe the asset sales CFPS (dil) (C$) announced to date have helped to accomplish three key objectives: reduced the risk around potential 2017E Old 2.45 credit downgrades, meaningfully strengthened its balance sheet and removed the risk that CVE might New 2.39↓ have to divest of assets at fire sale prices. 2018E Old 2.54 New 2.34↓

That said, the work to rightsize the balance sheet is not yet finished (in our view). Assuming CVE is able to Source: Desjardins Capital Markets fetch C$1b for Weyburn (our sales price expectation is C$975–1,350m), we estimate it needs a ~US$60/ bbl WTI price environment to sport net debt/cash flow of sub-2.0x in 2018. The problem with this is that oil prices have not touched US$60+/bbl WTI since mid-2015. Meanwhile, in a more modest recovery to US$55/bbl WTI, CVE would require an additional C$1.5b in asset sales to realize net debt/cash flow of 2.0x in 2018. As a result, we believe more asset sales are coming in 2019. Possible divestiture candidates include its undeveloped Kirby West oil sands assets and Deep Basin midstream assets. Even then, the headwinds noted above continue to loom large.

Valuation We reiterate our target price of C$14 per share, based on the equal weighting of our estimated 2017 NAV/share of ~C$15.50 and a 6.5x EV/DACF multiple (2018E).

Recommendation We reiterate our Buy–Above-average Risk recommendation.

4 OCTOBER 20, 2017 Dream Industrial Real Estate Investment Trust

Michael Markidis, CFA • (416) 607-3028 • [email protected] David Chrystal, Associate • (416) 607-3033 • [email protected] Alex Leon, CPA, CA, Associate • (416) 607-3081 • [email protected]

Rating: Hold, Risk: Average, Target: C$9.50 DIR.UN C$9.16, TSX

Brian Pauls joins the Dream team

The Desjardins Takeaway DIR’s CEO search, which was announced in mid-April, has successfully concluded with the appointment Click here for full document of Brian Pauls. We believe this event, combined with the formation of a strategic relationship between Dream Unlimited and Pauls Corporation (PaulsCorp), will result in the acceleration of DIR’s US expansion, Key changes which has largely been conceptual until this point. Our target moves to C$9.50 (from C$9.25) and we Target (C$) Old 9.25 reiterate our Hold–Average Risk rating. New 9.50↑ Source: Desjardins Capital Markets

Highlights Seasoned real estate exec appointed as DIR’s new CEO. Effective January 1, 2018, Brian Pauls will become DIR’s new CEO. He is also joining Dream Unlimited (DRM), the REIT’s asset manager, as Senior Vice-President, Industrial. As a principal at PaulsCorp, Mr Pauls has amassed considerable acquisition and development experience in Canada and the US. Under his leadership, DIR will look to execute on its planned expansion into the US while continuing to grow its Canadian portfolio. We believe Mr Pauls will also play a key role in the future growth of DRM’s industrial development group, which was recently established to capitalize on opportunities to build modern industrial product on land held on DRM’s balance sheet and in an off–balance sheet partnership with Canadian Pacific Railway.

Strategic relationship with PaulsCorp established. Denver-based PaulsCorp is a capital management and real estate development firm. We believe the company is in the process of monetizing a substantial portion of its industrial holdings. DRM will tap into PaulsCorp’s advisory and acquisition team to assist in sourcing investment opportunities for DIR. This arrangement will not result in any additional asset management fees to the REIT. DIR will also engage PaulsCorp to provide property management services in the US.

Valuation DIR trades at a 7.2% implied cap rate and a 12% discount to our NAV. Our revised target price of C$9.50 (was C$9.25) is now based on a ~10% NAV discount (vs a 10–15% NAV discount previously) and equates to 10–10.5x our 2019 FFO estimate.

Recommendation Mr Pauls’ appointment represents the conclusion of DIR’s CEO search, which was announced in mid- April. Combined with the relationship established with PaulsCorp, we believe it bolsters the credibility of DIR’s US expansion strategy. We reiterate our Hold–Average Risk rating.

5 OCTOBER 20, 2017 Rogers Communications Inc.

Maher Yaghi, CPA, CMA, CFA • (514) 281-8664 • [email protected] Jerome Dubreuil, Associate • (514) 289-4458 • [email protected]

Rating: Hold, Risk: Average, Target: C$67.50 RCI.B C$66.05, TSX/RCI US$52.88, NYSE

Increased profitability fuels additional capex

The Desjardins Takeaway RCI reported results that were generally in line with expectations. The company increased its EBITDA Click here for full document guidance for 2017, but most of the EBITDA improvement is slated to be invested in the network as the company also increased its capex guidance for the year. Overall, with the stock trading at a premium Key changes to other names in the sector and with capex not expected to decline vs a year ago in FY18, we would Target (C$) Old 66.50 wait for a better entry point. New 67.50↑ EPS (C$) 2017E Old 3.51 Highlights New 3.52↑ Rogers reported improved profitability metrics in 3Q17, fuelled by strength in wireless. Decent EBITDA 2018E Old 3.84 performance in the quarter coupled with past performance earlier in the year enabled the company to New 4.06↑ increase its EBITDA guidance for 2017. It is worth mentioning that consensus EBITDA was already above EBITDA (C$m) 2017E Old 5.3b the previous guidance entering the reporting period. FCF guidance was unchanged, however, given the New 5.4b↑ increase in targeted capex. 2018E Old 5.6b New 5.7b↑ Wireless subscriber loading was strong once again this quarter and was mostly generated by a significant Source: Desjardins Capital Markets improvement in churn. On the other hand, wireline subscribers were weaker than expected. We believe this was likely due to the price it paid by acting more rationally on pricing vs the heavy promotions made last year.

Overall, we see business fundamentals continuing in the right direction, with debt reduction well underway and a return to dividend growth mode likely in FY18, driven by continued EBITDA growth.

Valuation Our valuation for Rogers is based on the average of a DCF approach and an NAV-based model, which yields our new target price of C$67.50 (from C$66.50). Our three-stage DCF utilizes a WACC of 7.1% and a terminal growth rate of 2.0%, which yields a one-year value of C$67.71. For our NAV-based valuation, we apply an 8.0x EBITDA multiple to our 2018 EBITDA estimates for wireless and cable, and an 8.0x multiple for media, which yields a one-year value of C$69.95.

Recommendation While earnings momentum is strong and a return to dividend growth is likely in 2018, Rogers is now trading at a premium to BCE and TELUS, which we do not see as sustainable given the expected similar trends in EBITDA and dividend growth in the medium term. Hence, we would wait for a better entry point at this stage.

6 OCTOBER 20, 2017 Industry comments Oil & Gas

Kristopher Zack, CPA, CA, CFA • (403) 532-6613 • [email protected] Justin Bouchard, P.Eng., CFA • (403) 532-6615 • [email protected]

Natural Gas Report—supportive injection lost in noise of mild winter outlook

The Desjardins Takeaway The EIA reported a 51 bcf injection vs consensus expectations of 53 bcf; this was handily below the five- Click here for full document year average of 78 bcf to drive the first significant expansion of the budding storage deficit. However, the focus is rapidly shifting toward the winter heating season where the near-term weather forecast remains bearish. Meanwhile, the monthly NOAA outlook released this morning highlighted favourable odds for above-normal temperatures throughout most of the US between November and January.

Highlights Mild weather driving choppy demand transition from power to heating. Residential/commercial consumption continued its relatively slow seasonal ascent, increasing by only ~2 bcf/d this week to 11.7 bcf/d according to PointLogic data, below the five-year average of ~14 bcf/d as mild temperatures suppressed fall heating demand. And the slow ramp-up in heating demand failed to offset the 3.3 bcf/d seasonal decrease in power generation, which will likely result in a slightly larger injection with next week’s report; we anticipate an injection in the 50–70 bcf range for the week ending October 20, although this is still slightly below the five-year average of 75 bcf. However, seasonal production outages have supported the market entering the final weeks of the injection season as many regional storage caverns begin nearing capacity.

NOAA long-range forecast highlights potential for mild conditions between November and January. The monthly report released earlier this morning noted that the revised outlook favours above-normal temperatures for most of the US during the first three months of the traditional winter heating season (see updated contour maps). However, the enhanced odds for below-normal temperatures in the February–April timeframe in the Upper Midwest in particular were also highlighted, which could indicate the potential for a more favourable close to the winter heating season.

Soft fall heating demand expected to continue with persistently mild conditions remaining on the forecast through early November. The forecast indicates 48 cumulative Heating Degree Days (HDDs) for the week ending October 26, significantly below normalized levels of 76; this would likely translate into a 65–85 bcf injection according to our estimates, above the five-year average of 60 bcf. And the following week ending November 2 is only slightly more constructive, with 67 cumulative HDDs currently indicated vs normalized levels of 90; we would expect this to set up an injection in the 50–70 bcf range, above the five-year average of 45 bcf.

7 OCTOBER 20, 2017 DISCLOSURES COMPANY-SPECIFIC DISCLOSURES Desjardins Capital Markets has performed investment banking services for AltaGas Ltd. and Cenovus Energy Inc. in the past 12 months. Desjardins Capital Markets has received compensation for investment banking services from AltaGas Ltd. and Cenovus Energy Inc. within the past 12 months. Desjardins Capital Markets has managed or co-managed a public offering of securities for AltaGas Ltd. in the past 12 months. Desjardins Capital Markets has received compensation for non-investment banking, non-securities-related services from AltaGas Ltd., Rogers Communications Inc., Cenovus Energy Inc. and Dream Industrial Real Estate Investment Trust in the past 12 months. AltaGas Ltd., Rogers Communications Inc., Cenovus Energy Inc. and Dream Industrial Real Estate Investment Trust is/are a client for which a Desjardins Capital Markets company has performed non-investment banking, non-securities related services in the past 12 months. AltaGas Ltd., Rogers Communications Inc., Cenovus Energy Inc. and Dream Industrial Real Estate Investment Trust is/are (or was/were) a client of Desjardins Capital Markets or an affiliate within the Desjardins Group within the past 12 months and received non-securities related services. The Desjardins Capital Markets research analyst(s) and/or associate(s) has viewed a material operation of Rogers Communications Inc., which includes but is not limited to mines, distribution centres, warehouses, production plants and/ or other facilities related to the day-to-day operations of Rogers Communications Inc. as applicable, and the related travel expenses have not been paid for by the issuer.

ANALYST CERTIFICATION Each Desjardins Capital Markets research analyst named on the front page of this research publication, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst’s personal views about the company and securities that are the subject of this publication and all other companies and securities mentioned in this publication that are covered by such research analyst, and (ii) no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this publication.

STOCK RATING SYSTEM Top Pick Buy Hold Sell Not Rated Desjardins’ best investment Stocks that are Stocks that are Stocks that are expected Stock is being ideas—stocks that offer the expected to expected to perform to underperform their covered exclusively best risk/reward ratio and that outperform their in line with their respective peer group* over on an informational are expected to significantly respective peer group* respective peer group* a 12-month period (includes basis outperform their respective over a 12-month period over a 12-month period recommendations to tender peer group* over a 12-month to a takeover offer) period

RISK QUALIFIERS Average Risk Above-average Risk Speculative Risk represented by the stock is in line Risk represented by the stock is greater than High degree of risk represented by the with its peer group* in terms of volatility, that of its peer group* in terms of volatility, stock, marked by an exceptionally low liquidity and earnings predictability liquidity and earnings predictability level of predictability * Peer group refers to all of the companies that an analyst has under coverage and does not necessarily correspond to what would typically be considered an industry group. Where an analyst’s coverage universe is such that ‘relative’ performance against a ‘peer group’ is not meaningful, the analyst will benchmark the rating against the most appropriate market index

Distribution of ratings Rating Desjardins Desjardins coverage % Desjardins Investment % category rating universe (# of stocks) distribution Banking (# of stocks) distribution Buy Buy/Top Pick 85 62 59 64 Hold Hold 51 37 32 35 Sell Sell/Tender 1 1 1 1 Total 137 100 92 100

8 OCTOBER 20, 2017

AltaGas Ltd. rating history as of 19-Oct-17 powered by: BlueMatrix I:H:C$34.00 B:C$38.00 H:C$32.00 H:C$29.00 25-Apr-16 21-Oct-16 6-Feb-17 11-Oct-17 50

25 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

Closing price Target price

Rogers Communications Inc. rating history as of 19-Oct-17 powered by: BlueMatrix B:C$48.50 B:C$47.50 B:C$48.50 B:C$51.00 H:C$54.00 H:C$52.50 H:C$56.00 H:C$61.00 H:C$57.50 H:C$59.00 H:C$62.50 H:C$66.50 6-Jan-15 21-Apr-15 24-Jul-15 21-Oct-15 23-Oct-15 11-Jan-16 22-Jul-16 11-Aug-16 21-Dec-16 26-Jan-17 19-Apr-17 21-Jul-17 70 65 60 55 50 45 40 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

Closing price Target price

Cenovus Energy Inc. rating history as of 19-Oct-17 powered by: BlueMatrix B:C$33.00 B:C$30.00 B:C$29.00 B:C$28.00 B:C$23.00 B:C$24.00 B:C$20.00 B:C$14.00 8-Dec-14 12-Dec-14 29-Jan-15 13-Feb-15 26-Jan-16 28-Jun-16 6-Apr-17 21-Jun-17 45 40 35 30 25 20 15 10 5 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

Closing price Target price

9 OCTOBER 20, 2017

Dream Industrial Real Estate Investment Trust rating history as of 19-Oct-17 powered by: BlueMatrix B:C$9.75 B:C$10.00 B:C$9.50 H:C$9.00 H:C$8.50 H:C$9.00 H:C$9.25 9-Jan-15 19-Feb-15 6-Aug-15 10-Mar-16 4-May-16 3-May-17 9-Aug-17 11

6 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

Closing price Target price

Chart legend: TP: Top Pick, B: Buy, H: Hold, S: Sell, NR: Not Rated, I: Company initiation, T: Transfer of coverage, S: Coverage suspended, DC: Coverage dropped

Full disclosures for research of all companies covered by Desjardins Capital Markets can be viewed at https:// desjardins.bluematrix.com/sellside/Disclosures.action.

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