Thursday March 8, 2018ecdn.azureedge.net/assets/app/researchportal/2.0/...Warren Buffett, the...

This publication is a general market commentary and does not constitute a research report. Any reference to a research report or

a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This

commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or

partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice. Not authorized

for distribution into the United States or to U.S. persons. Canaccord Genuity Wealth Management is a division of Canaccord

Corp. Member – Canadian Investor Protection Fund.

Follow the Morning Coffee on Twitter at: http://twitter.com/CGWM_MrngCoffee

Thursday March 8, 2018

S&P/TSX Composite -0.47% 15472.61

Dow Jones -0.33% 24801.36

S&P 500 -0.05% 2726.80

NASDAQ 0.37% 7399.24

S&P/TSX Venture -1.38% 831.94

Crude Oil (US$/brrl) -1.98% 61.36

Gas (US$/mmbtu) 1.35% 2.79

Copper (US$/lb) -0.74% 3.14

Gold (US$/oz) -0.72% 1325.60

Nickel (US$/lb) -1.03% 6.16

Platinum (US$/oz) -0.02% 951.70

Silver (US$/oz) -0.02% 16.49

Uranium (US$/lb) 0.00% 22.25

Canadian Dollar -0.18% 0.7752

Bitcoin (US$) -8.30% 9830.99

10-Year Canada 2.11

10-Year U.S. 2.88

Volatility Index (VIX) -2.83% 17.84

The Most Wonderful Time of the Year

Warren Buffett, the world’s

third-richest man and a noted

basketball fan, is back with his

third annual March Madness

bracket contest for employees of

Berkshire Hathaway (BRK.A)

and its subsidiaries. Buffett will award $1 million per year to any of

his 367,700 people worldwide if they can guess

the Sweet 16. If no one manages to achieve that

mark, whoever gets the furthest will receive

$100,000, he added. Last year, two employees tied for that prize, and

received $50,000 each. Roughly 85,000 entered

the contest last year, though Buffett is betting

over 100,000 will participate this year. Buffett has gone back to the hoop so many times

on the million-dollar basketball bet (he even

once insured a $1 billion bet that no one in the

world could predict the Final Four because the

odds are well in his favour.

CANADA

The S&P/TSX Composite slipped on Wednesday, weighed by declines for

financial and industrial shares, after the resignation of top U.S. economic

adviser Gary Cohn added to investor worries of a trade war that could hurt

the global economy. The Bank of Canada kept its key interest rate on hold

at 1.25%, as it pointed to a climate of broadening, important unknowns

around trade. Canadian National Railway (CNR) is apologizing for failing to keep grain

shipments moving reliably by rail, and says it's taking immediate steps to

clear the backlog – including mobilizing more train cars and workers. A

manufacturer of aerospace systems and components, Magellan Aerospace

(MAL) reported fiscal fourth-quarter results that missed slightly. Both

revenue and EBITDA were shy of consensus although EPS beat on one-time

tax benefits. Mogo Finance Technology (MOGO) reported Q4 headline numbers that

were slightly ahead of expectations and featured better-than-expected

subscription and fee-based revenue growth.

UNITED STATES

Benchmark indexes were mixed on Wednesday as investors struggled to get

a read on U.S. trade policy after President Donald Trump promised hefty

import tariffs but then said Mexico and Canada could be exempt. United

States Steel (X) said it is going to restart its steelmaking facilities and one

blast furnace at an Illinois plant to handle higher demand in light of Trump’s

announcement on proposed steel tariffs. Coca-Cola (KO) announced plans to launch an alcoholic drink in Japan this

year, trying to get in on the growing market for “chu-hi” – canned, flavored

drinks typically made with sparkling water and local spirit shochu. J.M.

Smucker (SJM) and Conagra Brands (CAG) have called off a deal for the

Wesson cooking-oil brand after federal regulators said it could lead to higher

prices for consumers. Exxon Mobil (XOM), the world’s largest publicly traded oil producer, said

it expects earnings to more than double by 2025 to $31 billion, with crude

prices at or above current levels. Discount retailer Dollar Tree (DLTR) said revenue increased less than

expected in the fourth quarter, while profits also missed expectations, citing

higher wages. Clothing retailer Abercrombie & Fitch (ANF) topped

fourth-quarter expectations, driven by demand for its Hollister and its

namesake brands, as well as investments in online operations.

http://twitter.com/CGWM_MrngCoffee


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partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice. Not intended

for distribution within the United States. Canaccord Genuity Wealth Management is a division of Canaccord Corp. Member –

Canadian Investor Protection Fund.

ECON 101 CANADIAN Data Today: This morning, Housing Starts (Feb) are expected to rise to 216.5K from 216.2K the previous

month, while Building Permits (Jan) should fall by 1.5%, after gaining 4.8% before that. U.S. Data Today: This morning, Initial Jobless Claims (Mar 3) are expected to rise to 220K from 210K the previous week,

while Continuing Claims (Mar 10) should fall to 1,919K from 1,931K before that.

MARKET MOVERS Notable 52-Week Highs: Boyd Group Income Fund BYD.UN $ 111.99

Canfor Pulp Products CFX $ 16.25

Constellation Software CSU $ 879.80

Evolve Cyber Security Index CYBR $ 23.42

Dream Global REIT DRG.UN $ 12.86

Dynamic iShrs Act. Global Fin. DXF $ 23.27

FT AlphaDEX US Technology FHQ $ 36.87

Great Canadian Gaming GC $ 38.56

CGI Group GIB.A $ 76.35

HZN MGD GLB OPP HGM $ 11.41

InterRent REIT IIP.UN $ 10.01

Intertain Group ITX $ 16.30

Evolve Blockchain ETF LINK $ 20.24

Healthcare Special Opportun. MDS.UN $ 10.87

Mackenzie Floating Rate Income MFT $ 21.56

Manulife M.F. US Mid Cap MUMC.B $ 27.89

Manulife MF U.S. Small Cap MUSC.B $ 26.43

Northview Apartment REIT NVU.UN $ 25.80

Pollard Banknote Limited PBL $ 21.97

Shopify Inc. SHOP $ 186.63

TD Bank TD $ 76.07

Theratechnologies Inc. (D) TH $ 9.99

Spin Master TOY $ 59.85

The Stars Group Inc. TSGI $ 37.67

First Asset Tech Giants CC ETF TXF $ 17.91

iShares S&P/TSX Capped IT XIT $ 18.32

iShares S&P US Mid-Cap Index XMC $ 19.07

BMO Equal Weight US Banks ETF ZBK $ 29.50

Notable 52-Week Lows: Alaris Royalty AD $ 17.79

AGT Food and Ingredients AGT $ 14.75

AltaGas Ltd. ALA $ 22.82

Birchcliff Energy BIR $ 2.90

Bonavista Energy Corp. BNP $ 1.15

Big Rock Brewery BR $ 5.35

Callidus Capital Corp. CBL $ 8.12

Clearwater Seafoods Inc. CLR $ 3.94

Century Global Commodities CNT $ 0.13

Canadian Zinc CZN $ 0.13

Desjardins 1-5y Cdn Corp. Bond DCC $ 19.29

Dividend 15 Split Corp. II DF $ 5.96

EnerCare Inc. ECI $ 17.63

EcoSynthetix Inc. ECO $ 1.90

Enbridge Inc. ENB.PF.I $ 25.20

Freehold Royalties FRU $ 11.77

Gibson Energy GEI $ 15.80

Gluskin Sheff + Associates Inc GS $ 14.17

High Liner Foods HLF $ 10.46

KP Tissue Inc. KPT $ 12.34

Evolve Blockchain ETF LINK $ 19.90

Raging River Exploration RRX $ 5.72

Spectra7 Microsystems SEV $ 0.16

Source Energy Services SHLE $ 5.52

TD Bank TD.PF.F $ 24.66

Cdn. Utilities & Telecom UTE.UN $ 8.85

Seven Generations Energy VII $ 13.62

CANADIAN EQUITIES OF INTEREST Listed Alphabetically by Symbol

Bank of Canada

Canada: The Great White North Korea if you follow the administration down south… The Bank of Canada kept borrowing

costs on hold Wednesday and indicated it’s no rush to pursue aggressive interest rate hikes amid growing global trade tensions

and softer housing data. The decision to hold rates steady was widely expected by the street and repeated ubiquitous language

about moving cautiously in an economy that will require continued stimulus. The broader trade comment was new, though

policy makers made no explicit mention of U.S. President Donald Trump’s threats to impose tariffs on steel and aluminum. The


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BoC added that while trade policy is an "important and growing source of uncertainty," inflation is running close to 2% and the

economy is near capacity. Nodding to the dual influences of policy decisions in the United States, Canada's largest export

market, the bank said that new U.S. government spending and tax cuts are anticipated to boost American growth in 2018 and

2019. In holding rates steady after three rate hikes since last July, the bank acknowledged that fourth-quarter GDP growth was

slower than expected, largely due to higher imports, while exports made only a partial recovery from their third-quarter decline.

It noted that while wage growth has firmed, it "remains lower than would be typical in an economy with no labor market slack."

Turning to Canada's precarious housing market, the bank said strong data late in 2017 and softer data this year suggests that

some demand was pulled forward ahead of new mortgage rules that have made it harder for some buyers to get financing. It

remains to be seen whether the slowdown will last, but it's already clear the central bank is paying attention to whatever changes

are underway in the housing market. "It will take some time to fully assess the impact of these [rules] on housing demand and

prices," the bank said, adding that "the bank continues to monitor the economy's sensitivity to higher interest rates."

Bitcoin Spot (BTC=BTSP : US$9,775.58), Net Change: -945.82, % Change: -8.82%

Hive Blockchain Tech* (HIVE : $1.52), Net Change: -0.14, % Change: -8.43%, Vol: 2,224,796

Hut 8 Mining * (HUT : $4.58), Net Change: 0.58, % Change: 14.50%, Vol: 833,768

Cryptoglobal* (CPTO : $0.83), Net Change: -0.13, % Change: -13.54%, Vol: 457,503

Global Blockchain Tech* (BLOC : $0.59), Net Change: -0.06, % Change: -9.23%, Vol: 1,671,766

Big Blockchain Intelligence* (BIGG : $0.75), Net Change: -0.04, % Change: -5.06%, Vol: 560,715

We’re selling the farm and moving to Venezuela! The price of Bitcoin tanked on Wednesday, breaking below the $10,000

mark once again. While it's not entirely clear, again, what factors sparked the sell-off, the timing coincides with reports of

unauthorized sells on cryptocurrency exchange Binance. The exchange has since suspended withdrawals, according to

statements, with the situation coming less than a month after a prolonged system upgrade raised fears of a hack. On a stock

specific level, there are also concerns going forward in regard to the business model itself of mining cryptocurrencies. Bitcoin

is expensive, fact. This is whether you buy it from a broker or mine it yourself. But it’s a lot more expensive to mine in some

countries than others. Elite Fixtures has compiled a list of mining costs throughout the world, using averaged data from three

mining rigs and average electricity rates in 115 countries as of January 2018. And, based on those results, you absolutely do not

want to launch a mining operation in South Korea. It costs $26,170 to mine a single Bitcoin in that country – that’s like paying

to Toonie to buy a Loonie. The U.S. was a little more than midway down the list, with the average cost coming in at $4,758.

However, this is very dependent on the State where the mine is located. And Venezuela is the cheapest place on earth to do your

mining, with an average cost of $531, as energy rates are subsidized by the government there. In Canada, the price stands around

$3,965 while in Iceland, readers may be surprised to hear this, it costs $4,746.

Pure Industrial REIT* (AAR.UN : TSX : $8.05), Net Change: 0.01, % Change: 0.12%, Vol: 325,801

Fifteen days to go! Pure Industrial REIT has scheduled its special unitholders meeting for March 23, 2018, to vote on the

proposed acquisition of Pure Industrial by Blackstone Property Partners. In order for the acquisition to be successful and close,

holders of at least 66.67% of the units who vote at the meeting including proxy votes must approve the transaction. If the

transaction is approved, the sale is scheduled to close during Q2 2018. Pure Industrial had agreed to be acquired by Blackstone

Property Partners for $8.10 per unit in an all-cash transaction. The offer price values the REIT’s portfolio at $3.8B including

debt and equates to an implied cap rate of approximately 4.7%. For Q4, Pure Industrial reported funds from operations (FFO)

per diluted unit of $0.100, down 1.9% from $0.102 per unit in Q4 2016 and in line with consensus of $0.102. The slight decline

was driven by an increase in general and administrative expense primarily due to special transaction costs related to the

Blackstone proposition, the negative impact from foreign exchange as the US dollar weakened, year over year, against the

Canadian dollar, and the REIT operating at lower leverage. Partially offsetting was a 2.9% increase in same-property net

operating income and contributions from acquisitions. For the full-year 2017, FFO per diluted unit was $0.398, down 1.7%

from $0.405 per unit in 2016.

Click here for more

BCE* (BCE : TSX : $56.58), Net Change: -0.05, % Change: -0.09%, Vol: 1,409,241 Quest▼3 Rogers Communica.* (RCI'B : TSX : $58.89), Net Change: -0.03, % Change: -0.05%, Vol: 641,405 Quest▼2 Netflix (NFLX : US$321.00), Net Change: -4.21, % Change: -1.29%, Vol: 17,014,998 Quest▲9

Thanks to this law, we’ve been tormented by the likes of Avril Lavigne, Simple Plan, and NickelBack. Swallowed down with

a hard chaser of Corner Gas, The Littlest Hobo, Beachcombers, and The Red Green Show. Netflix has the largest primetime

television audience in Canada. It has the most subscribers of any TV service provider. Naturally with such success, there’s

growing frustration among the incumbents that the Canadian regulatory regime treats Netflix differently, since it exempts digital

media endeavours from the Canadian content quotas and funding requirements traditional broadcasters must obey. At the request

https://clientaccess.canaccord.com/


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of the federal government, the Canadian Radio-television and Telecommunications Commission (CRTC), has until June 1 to

deliver a report on future business models to ensure a “vibrant domestic market” that supports the creation, production and

distribution of Canadian content. But how does the CRTC tackle this problem in the online streaming era? According to a

Financial Post report, one camp wants the government to enforce broadcast regulations for streaming services such as Netflix;

another wants it to deregulate broadcasting. Many called on the government to at least require Netflix to collect and remit sales

taxes. Rogers and BCE both proposed regulations to force streaming services to fund Canadian content as traditional

broadcasters are required to do. Rogers pitched a revised framework that would apply to all content providers, regardless of

platform, producer or content. “It is our view that regulatory symmetry is the only fair and reasonable way to ensure the long-

term health of Canadian programming, in both official languages,” Rogers said. It proposed over-the-top services, alongside

broadcasters, pay 30% of their revenue to fund Canadian programming expenditures. Under this framework, all programming

would have to follow CRTC Canadian content rules and all providers would have the same access to funding. Netflix has an

estimated six million subscribers in and if these users all paid the standard monthly price of $10.99, Netflix would earn roughly

$790 million annually.

CP Railway* (CP : TSX : $226.59), Net Change: -0.15, % Change: -0.07%, Vol: 313,667 Quest►5 CN Railway* (CNR : TSX : $94.09), Net Change: -0.69, % Change: -0.73%, Vol: 1,281,691 Quest►5

“Compromising Canada’s reputation.” Too late, that was done on the Olympic Curling/Hockey stage. Canadian National

Railway is apologizing for failing to keep grain shipments moving reliably by rail, and says it's taking immediate steps to clear

the backlog - including mobilizing more train cars and workers. The announcement comes just two days after CN said its

president and CEO would be leaving the company immediately amid growing complaints that the backlog of shipments is

compromising Canada's reputation as a reliable exporter, costing sales and putting farmers in a cash-flow crunch. Interim CEO

Jean-Jacques Ruest said Wednesday in a statement, “We can and we will do much better, and that starts today - no excuses.”

CN recently earned a public rebuke from key customer Halliburton (HAL), which said rail service delays would hurt earnings

at the oilfield-services company. Among steps announced Wednesday, CN is offering incentives for “key operating employees”

to delay retirement and postpone vacations, and for recently retired staff to return to work. The company also leased 130

locomotives to boost capacity in Western Canada, almost all of which are now operating. In January, CN said it would boost its

2018 capital-spending budget to a record $3.2 billion and hire about 400 conductors in the first quarter alone. The company in

December said it would buy 200 locomotives. According to the Ag Transport Coalition, CN and Canadian Pacific combined

provided only 38% of the rail cars ordered by grain shippers during the week of February 12 - CP delivered 66% of its orders

and CN just 17%. CN said it delivered 4,577 empty hopper cars last week, a 35% increase from the February average of 3,400.

All available hopper cars are in service, and the carrier said it would progress toward 5,000 a week by the end of March.

Magellan Aerospace* (MAL : TSX : $20.28), Net Change: -0.04, % Change: -0.20%, Vol: 8,315 Quest►6

Where every member of the Morning Coffee shops for their plane parts. Magellan Aerospace reported Q4 2017 results

overnight that Canaccord Genuity Airlines & Aerospace Analyst Doug Taylor characterizes as a modest miss. Both revenue

and EBITDA were shy of consensus and Taylor’s estimates. EPS beat on one-time tax benefits. The updated outlook held no

surprises and highlights the strong fundamentals in the commercial aircraft and defense markets, while flagging the risks around

the vertical integration of OEMs and potential consolidation among them. Though Magellan supports virtually all primary

commercial aircraft platforms from both Boeing (BA) and Airbus, Taylor does see emerging margin pressure as a key challenge

for the company, in addition to potential geopolitical risks such as NAFTA, etc. Revenue of $236m fell short of consensus of

$248M and Taylor’s estimate of $245m. Adjusted for currency headwinds, revenue was down 0.9% YoY. Adjusted EBITDA

of $41M was similarly lower despite higher investment credits. Reported EPS of $0.55, Taylor thinks normalizes to about $0.38

excluding the tax benefits, vs. the street at $0.37 and Taylor’s at $0.38. With stable cash flows and tax benefits, Magellan is

paying down debt aggressively with $23m paid during Q4 and exited the year with net debt of $43M or 0.2x leverage ratio.

This, combined with a $200m credit facility, Taylor believes, should provide the company enough dry powder if an attractive

target presents itself.

Click here for more

Mogo Finance* (MOGO : TSX : $4.71), Net Change: -0.15, % Change: -3.09%, Vol: 85,793

They make owing money cool! Mogo reported Q4 headline numbers that were slightly ahead of expectations and featured

better-than-expected subscription and fee-based revenue growth (higher quality revenue). Canaccord Genuity Tech Analyst

Doug Taylor says, as a data point, the quarter suggests Mogo is tracking towards the key 2018 targets provided by management.

Taylor is bullish on the stock as he believes there is value in the platform Mogo is building which is not reflected in its financial

results or the current valuation. However, he acknowledges that Mogo is early in the development roadmap and the company is

reinvesting heavily in expanding its product offering and user base. These investments are depressing near-term profitability



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while potentially increasing long-term potential. Revenue for the quarter was $13.3 million vs. Street $13.0 million and reported

EBITDA $1.0 million vs. the Street $0.7 million. The beat was in higher quality subscription and fee based revenue. The

company stuck to the prior guidance of achieving 800K – 1M users by the end of 2018 (from 544k as of year-end) and deriving

close to half of its revenue from subscription and fee-based revenue which Taylor sees as key to driving valuation higher given

less capital intensity and a more recurring nature. In the near term, the company continues to plan the roll out of its MogoCrypto

offering to a limited customer set by the end of this month and then to the broader user base by Q2. But you ask what could take

this stock higher? Well, Taylor says: 1) A more concrete view of the uptake of the MogoCrypto offering and its transaction fee

structure; 2) Ongoing metrics confirming the MogoProtect, MogoMortgage and MogoCard products are tracking toward the

goal of “Other Revenue” becoming ~50% of revenue by the end of this year; 3) The company continuing to add functionality

to the platform to increase user monetization (robo advisor, savings account, life insurance, etc.).

Theratechnologies* (TH : TSX : $9.20), Net Change: -0.03, % Change: -0.33%, Vol: 1,708,255 Quest▲10

Key Words: First in 10 years… Shares of Theratechnologies touched another high after the FDA approved Trogarzo

(ibalizumab) for the treatment of multi-drug resistant HIV. While this decision from the Agency is not unexpected, Canaccord

Genuity Life Sciences Analyst Neil Maruoka says the timing will likely be a surprise to investors that were anticipating an

approval on the drug’s April 3 PDUFA date. Moreover, any concerns that investors may have had following the PDUFA delay

last November (fears that the FDA’s issues went beyond a request for additional manufacturing data) will be allayed with this

approval. Overall, he believes this is a positive milestone for the company, and its partner TaiMed Biologics, given the FDA’s

faster turnaround for the file. Maruoka believes Trogarzo addresses an unmet clinical need in MDR HIV patients, as it represents

the first novel HIV therapeutic class to be approved by the FDA in the last 10 years. Investor attention should now shift to the

commercialization and launch of Trogarzo, which he estimates targets a US market opportunity of potentially more than $1

billion. The FDA approval of Trogarzo completes Theratechnologies’ transition to an HIV-focused specialty pharma company.

With the stock up +28% on the back of this news, Maruoka recommends investors accumulate on dips ahead of the U.S. launch

of Trogarzo.

Click here for more

U.S. EQUITIES OF INTEREST Listed Alphabetically by Symbol

Autodesk (ADSK : US$137.02), Net Change: 17.21, % Change: 14.36%, Vol: 12,508,807 Quest▼1

All by design. Autodesk reported a smaller-than-expected loss in the fourth quarter as it signed up more subscribers. The

AutoCAD software maker, which competes with Adobe Systems (ADBE), Ansys (ANSS) and Dassault Systemes for design

customers, is gaining from a shift to a subscription-based business model that helps bring in more recurring revenue. The

company reported a net loss of $173.5 million compared with $173.4 million a year earlier. Excluding one-time items, Autodesk

lost $0.09 per share, smaller than the $0.11 analysts on average were expecting. Total revenue rose 15.7% to $553.8 million,

higher than analysts’ expectation of $544.7 million. Autodesk’s subscription revenue, which makes up over half its total

revenue, more than doubled to $293.7 million in the three months ending January 31, while annualized recurring revenue (ARR)

rose 25% to $2.05 billion. “The continued positive trends we’re seeing in ARR are clear signals that the transition is working,”

CEO Andrew Anagnost said on a call with analysts. Autodesk began its transition to the subscription model in 2016, bowing to

pressure from investors Sachem Head Capital Management and Eminence Capital. In June last year, the company replaced Carl

Bass as CEO with Anagnost, after the two activist hedge funds also pushed for cost cuts and management changes. As part of

its long-term plan, the company will seek fewer but higher-value subscriptions from businesses, Anagnost added. The plan

seems to be working – shares have nearly doubled in value since 2016.

Abercrombie & Fitch (ANF : US$23.90), Net Change: 2.55, % Change: 11.94%, Vol: 13,599,586 Quest▲9

The place to go when you’re ready to graduate from khakis to…chinos. Abercrombie & Fitch beat expectations for holiday

quarter comparable sales, driven by demand for its Hollister and Abercrombie brands as well as investments in online operations.

Net income rose 52% to $74.2 million in the fourth quarter ended February 3. Excluding items, Abercrombie earned $1.38 per

share, and reported a 15% rise in revenue to $1.19 billion; analysts on average had expected earnings of $1.10 per share on

$1.16 billion. To combat years of falling sales, Abercrombie ditched its logo-emblazoned, high-priced clothes and added trendier

denim and floral prints. The company and rivals such as Gap (GPS) have also been shutting stores and pouring more money in

building their online operations to better compete with Amazon (AMZN). As a result, sales at Abercrombie’s direct-to-

consumer business rose to about 34% of total sales, the highest in more than two-years. “The DTC investments we’ve made



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early and continue to build on, are paying off, validated by our customers’ high level of mobile engagement,” COO Joanne

Crevoiserat said on an analyst call. The Abercrombie brand posted a 5% rise in same-store sales in the quarter, its first increase

in five years, beating the analysts’ average estimate of 2.13%, helped by a revamp of its clothing styles and stores. Abercrombie

also forecast same-store sales for fiscal year 2018 to be up low-single digits percentage. Analysts are expecting an increase of

1.75%, on average. The company said it expects to close 60 U.S. stores this year, but plans to open 21 full-price stores in fiscal

2018 with half of them in international markets.

Dollar Tree (DLTR : US$89.20), Net Change: -15.15, % Change: -14.52%, Vol: 21,853,944 Quest▲8

Being uprooted. Dollar Tree reported disappointing holiday-quarter sales and issued a full-year profit forecast that was below

expectations, as the discount store operator spends more. Net income more than tripled to $1.04 billion, or $4.37 per share, in

the fourth quarter ended February 3, mainly due to a $583.7 million benefit from changes in the U.S. tax code. Excluding items,

Dollar Tree earned $1.89 per share, while net sales rose 13% to $6.36 billion, both missing estimates. Analysts note driver

shortages in the trucking industry coupled with rising wages for hourly retail workers in a tight labour market, have increased

costs for brick-and-mortar retail chains, which are already pouring a lot of money into their online business. Focusing on

customer service as a tool to one-up Amazon (AMZN) has also forced many retailers to pay hourly workers higher wages or

dole out bonuses, denting profits further. Dollar Tree said it would spend $100 million of the benefit from a new corporate tax

law to raise wages of hourly workers, give them more work hours and offer paid maternity leave for some employees, joining

similar moves made by Walmart (WMT) and Target (TGT). But as a result, rising wage actions and freight costs will hurt

full-year profits by $68 million. “We expect continued pressure on store payroll based on states increasing minimum wages and

general average hourly rate increases. We have budgeted higher freight costs and diesel costs than a year ago,” CFO Kevin

Wampler said on a post-earnings call. For the full-year, Dollar Tree expects a profit of $5.25-5.60 per share, much lower than

the average analysts’ estimate of $5.90.

Coca-Cola (KO : US$43.82), Net Change: -0.11, % Change: -0.25%, Vol: 9,354,443 Quest▼3

What "New Coke" should have been. Coca-Cola is planning a break with 125 years of tradition to experiment with its first

alcoholic drink, as the world’s largest soft drinks company eyes Japan’s growing market for “Chu-Hi” alcopops. The gambit,

which a senior Coke executive described as unique in its history will propel Coke into a competitive alcopop market dominated

by Japanese brands such as Strong Zero, Highball Lemon and Slat. The plans, which Coke’s Japan head said make sense given

the strength of the Chu-Hi market, have come to light almost four months after analysts speculated that Coke might shortly

announce a move into alcoholic drinks. The Chu-Hi market has hundreds of flavour varieties and, according to figures used by

the Japanese drinks group Suntory, has seen growth fluctuate 5-25% year on year since 2013. Chu-Hi canned drinks mostly

range in alcohol content ranging 3-8% — a profile that has put them in direct competition with beer, and proved particularly

attractive to female drinkers. The appeal of Chu-Hi has been enhanced by the relentless trial-and-error approach by major

Japanese producers Kirin, Asahi, Takara and Suntory, which have released flavours that include yoghurt, acerola and wild basil.

The total Japanese market for shochu, a vodka-like spirit distilled from potatoes, rice, barley or sugar that provides Chu-Hi with

its kick, has expanded by almost 40% since 2011.

J.M. Smucker (SJM : US$128.78), Net Change: -0.90, % Change: -0.69%, Vol: 628,232 Quest►5 Conagra Brands (CAG : US$37.78), Net Change: -0.51, % Change: -1.33%, Vol: 3,604,717 Quest▼2

Getting out of a jam. J.M. Smucker announced it will abandon its plan to acquire Conagra Brand’s Wesson oil brand after the

U.S. Federal Trade Commission moved to block the deal, arguing it would likely lessen competition and violate anti-trust law.

Smucker CEO Mark Smucker said, “It is not in the best interest of either party to expend the anticipated significant additional

time and resources to challenge the FTC's administrative complaint.” He added the FTC “underestimated the significant role

that private label brands play in the oils category, which account for approximately 50% of all cooking oil sales and hold

significantly higher market share at some retailers.” Conagra said in a statement that it was disappointed by the FTC’s decision

and would continue “its evaluation of the role of the Wesson oil business within its portfolio.” Smucker owns the Crisco brand.

If it acquired the Wesson brand, it would have controlled at least 70% of the market for branded canola and vegetable oils sold

to grocery stores and other retailers, the FTC said in a statement. The FTC said retailers and ultimately consumers “would likely

face higher prices for branded canola and vegetable cooking oil” if the deal were approved. The FTC said Smucker’s internal

documents acknowledged that eliminating price competition between Crisco and Wesson was a central part of its rationale for

the acquisition. Smucker had said it expected the deal to add about $230 million to its annual net sales. Note that there is no

break-up fee.


7







United States Steel (X : US$45.69), Net Change: 1.16, % Change: 2.60%, Vol: 18,324,287 Quest▲10

Tariffs are a blast! U.S. Steel announced it will restart one of two blast furnaces and the steelmaking facilities at its Granite

City Works, an integrated steelmaking plant in Granite City, Illinois. The additional capacity will support anticipated increased

demand for steel in the U.S. from the pending action announced by President Trump on March 1, according to a press release

from the company. U.S. Steel expects to call back approximately 500 employees starting this month. The process could take up

to four months. Both Granite City Works blast furnaces and its steelmaking facilities were inactive in December 2015 and the

plant’s hot strip mill was idled in January 2016 due to challenging market conditions, including global excess steel capacity and

unfairly traded imports. The hot strip mill was restarted in February 2017, as the company adjusted its hot strip mill operating

configuration to meet customer needs after deciding to accelerate the pace of its asset revitalization efforts.

Exxon Mobil (XOM : US$74.26), Net Change: -1.92, % Change: -2.52%, Vol: 26,761,979 Quest►5

You want the truth? The world’s largest publicly traded oil producer said on Wednesday it expects earnings to more than double

by 2025 to $31 billion, with crude prices at or above current levels. It was the first time Exxon has ever given an earnings

forecast so far in advance, highlighting how the company was working to woo Wall Street. Investors and analysts have

bemoaned that the company’s returns have sagged below those of rivals Royal Dutch Shell (RDS.A) and Chevron (CVX) in

recent years. Exxon CEO Darren Woods, who took the helm in January 2017 after predecessor Rex Tillerson left to become

U.S. secretary of state, said he was committed to being more transparent and improving results. Exxon said exploration projects

in Guyana and the Permian Basin as well as refining and chemical plant expansions, should help boost earnings. The company

is also spending money to make money, with plans to spend $24 billion on capital projects this year, $28 billion next year and

an average of $30 billion from 2023 to 2025. “If you look across our portfolio today, it’s the richest set of opportunities since

Exxon and Mobil merged” in 1999, Woods said. “We see the full potential of the organization: significant earnings growth will

improve return of capital employed.” Production is expected to grow by about 1 million barrels of oil equivalent per day (boe/d),

to about 5 million boe/d in 2025 as 25 projects come online. Looking only at the Permian Basin of Texas and New Mexico, the

largest U.S. oilfield, Exxon plans to triple production by 2025 as it taps the low-cost acreage.

COFFEE BEANS – An audited financial statement released by the NCAA on Wednesday showed the governing body of college athletics generated

nearly $1.1 billion in revenue during the 2017 fiscal year. The findings revealed a $105.1 million operating surplus. It's the first

time the NCAA has surpassed $1 billion in revenue. (Bleacher Report) – Most Millennials are not on track when it comes to saving for retirement. That’s no surprise. But a new report shows just how

far off track they might be. About 66% of people between the ages of 21 and 32 have absolutely nothing saved for retirement,

according to the National Institute on Retirement Security. (CNN) – The U.S. trade deficit climbed 5% in January and hit a near 10-year high. The U.S. trade deficit rose to $56.6 billion in January

from $53.9 billion in December, the Commerce Department said Wednesday. Economists had forecast a $55.2 billion gap. The

deficit in January was 16% higher compared with the same month in 2017, when President Trump took office. (MarketWatch) – A semi-truck carrying Busch beer overturned on a Florida highway, spilling thousands of cans of the beverage onto Interstate

10, according to the Okaloosa County Sheriff's Office. The truck went onto the north shoulder of the road and ended up turning

over on its passenger side. Nearly 60,000 pounds of Busch beer was spilled onto the highway. (CNBC)


8







GO FIGURE

According to research conducted by Elite Fixtures, the cost of mining a bitcoin varies significantly around the

world, from as little as $531 to a stunning $26,170. The Elite Fixtures report looked at the costs to mine a single

bitcoin in 115 different countries based on average electricity rates according to local government data, utility

company reports, and/or information from the Paris, France-based International Energy Agency, the U.S. Energy

Information Administration and currency-data company Oanda.


9







THE LAST DROP: The company is going to award a prize for whichever employee goes the furthest. And if you get through

the Sweet 16, you get $1 million a year for life. Which, if Creighton or Nebraska won, would be $2 million a year for life.

– Berkshire CEO Warren Buffet, announcing his March Madness prize

Quest®: Canaccord Genuity’s proprietary online valuation and analytical tool which combines consensus market figures with

the Quest® Discounted Cash Flow (DCF) Valuation Model. Quest® triAngle is Canaccord Genuity’s proprietary 15 factor stock-picking tool, which systematically measures Value, Quality

and Momentum and presents the results in a simple, easy to understand score. It takes a multi-pronged approach to Value, Quality

and Momentum using five factors for each component, which adds more consistency of performance unlike a reliance on one

single measure. It uses a mix of historic and forecast data, and combines absolute valuation data with comparisons relative to

history. The triAngle is designed to generate stock ideas and provide a consistent framework for analysis of portfolio holdings. How the triAngle score is calculated

* Canaccord Genuity and its affiliated companies may have a Corporate Finance or other relationship with the company and

may trade in any of the Designated Investments mentioned herein either for their own account or the accounts of their customers,

in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation

that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage contained in the Morning

Coffee.

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