October 2, 2022
Contained in the Market’s roundup of a few of at the moment’s key analyst actions

Contained in the Market’s roundup of a few of at the moment’s key analyst actions

Whereas its fourth-quarter monetary outcomes exceeded expectations, iA Capital Markets analyst Neil Linsdell lowered his suggestion for North West Firm Inc. (NWC-T) in response to current share worth appreciation.

On Wednesday, the Winnipeg-based retailer reported income of $579-million, up 2.4 per cent and above the estimates of each the analyst ($552-million) and the Road ($556-million). Adjusted earnings earlier than curiosity, taxes, depreciation and amortization of $67.1-million additionally topped expectations ($61.9-million and $61.3-million, respectively).

“The Firm continued to indicate resiliency by means of the pandemic by sustaining or gaining market share with pricing optimization, strengthening the availability chain, and solidifying relationships with suppliers, with long-term initiatives which are centered on expertise and tradition,” he stated. “The Firm expects to scale up capex in F2023 with development investments and extra retailer acquisitions, though the general surroundings stays difficult, with worldwide provide chain disruptions and inflation pressures, and the winding down of presidency assist funds.”

Mr. Linsdell warned the corporate is more likely to be affected within the coming quarters by decreased spending in rural areas as a result of scaling again of presidency assist applications. He additionally sees the influence of provide chain disruptions and rising inflationary prices weighing, although he famous it has been securing stock to mitigate the unfavourable influence.

“On the optimistic aspect, NWC will profit from its market management in hard-to-reach communities, backed up by its well-managed logistics and the power to move by means of at the very least some inflation prices,” he stated. “The gradual return of tourism to the Caribbean will even be a tailwind, benefitting Price-U-Much less (CUL) and RiteWay Meals Markets.”

Transferring the inventory to “maintain” from “purchase,” Mr. Linsdell maintained a $39 goal. The typical on the Road is $39.40.

“With an emphasis on enhancing buyer expertise, the Firm is engaged on retaining clients after journey restrictions are decreased and authorities assist funds are discontinued,” he stated. “The pandemic offered alternative for the Firm to show short-term advantages into longer-term features by means of fine-tuning its logistics, enhancing product combine, and optimizing pricing. NWC has fared effectively by means of the pandemic, and we imagine the outlook remains to be optimistic total regardless of some normalization in buying habits as the need of in-community buying eases.

Elsewhere, CIBC’s Mark Petrie raised his goal to $41 from $40 with a “impartial” ranking, whereas TD Securities’ Michael Van Aelst elevated his goal to $40 from $39 with a “maintain” ranking.

“Though we see working efficiency and earnings remaining effectively forward of prepandemic ranges (2022 EBITDA ex-SBC anticipated to be 36 per cent above 2019 ranges), catalysts are onerous to foresee, with the share worth buying and selling slightly below all-time highs and adjusted earnings (ex-SBC) anticipated to say no fairly meaningfully year-over-year all through 2022 as authorities assist funds decline, residents resuming at the very least some vacation spot buying, and a few value inflation is absorbed,” stated Mr. Van Aelst. “We might search for a greater entry level to reap the benefits of NWC’s enticing distant markets (usually greater inhabitants development, higher authorities funding, and extra secure private earnings) and important logistical benefits (together with inner air and maritime transport capabilities).”

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Fairness analysts at Nationwide Financial institution made a sequence of ranking modifications and raised their goal costs for Canadian vitality shares on Thursday.

Dan Payne upgraded Surge Power Inc. (SGY-T) to “outperform” from “sector carry out” with a $14.50 goal, up from $10 and above the $12.57 common.

He additionally raised Baytex Power Corp. (BTE-T) to “outperform” from “sector carry out” and bumped his goal to $8.75 from $6.50. The typical is $7.68.

The agency’s goal modifications included:

  • Canadian Pure Sources Ltd. (CNQ-T, “outperform”) to $100 from $90. Common: $84.24.
  • Cenovus Power Inc. (CVE-T, “outperform”) to $35 from $28. Common: $24.76.
  • Imperial Oil Ltd. (IMO-T, “outperform”) to $78 from $70. Common: $62.
  • Suncor Power Inc. (SU-T, “sector carry out”) to $54 from $52. Common: $46.81.

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Calling it “a de-leveraging first, capital return second, story,” Scotia Capital analyst Jonathan Goldman sees CES Power Options Corp. (CEU-T) poised to learn from important current shifts within the vitality sector.

In a analysis report launched Thursday, he initiated protection of the Calgary-based firm with a “sector outperform” suggestion.

“In January, giant oilfield providers (OFS) friends had been calling for North American market development of 20 per cent to 30 per cent in 2022,” he stated. “Since then, a number of elements – specifically, greater oil costs and decreased world provide resulting from sanctions – have additional raised the prospect of development in drilling and manufacturing exercise.

“As demand improved by means of 2021, provide chains introduced a number of logistical challenges and margin headwinds for CES (and its friends). Attributable to inflationary pressures, administration reset 1Q22 EBITDA margin expectations decrease. With worth pass-throughs within the works, we anticipate 1Q22 margins to be a low level and for EBITDA development to speed up in 2H22. Regardless of our conservative margin assumptions – we forecast EBITDA margins of 11.7 per cent in 2022 and 13.4 per cent in 2023 (in contrast with 13.7 per cent from 2017 to 2019) – we imagine CES is firmly set to generate file earnings (and FCF) by means of our forecast horizon.”

Mr. Goldman expects CES to leverage to its extra capability by means of the upcycle to generate FCF of greater than $250-million by means of subsequent 12 months, which he notes equates to virtually 40 per cent of its present market cap.

“With the capital base working at lower than 50-per-cent capability, we expect CES can increase its income base by greater than $500 million (versus 2021) with out requiring a lot capital,” he stated. “For 2022, CES initiatives $40 million of capex (versus a median of $70 million from 2017 to 2019). Extra capability constructed out in earlier cycles will possible allow the corporate to generate file FCF and improve capital optionality within the present cycle.”

Additionally touting the energy of its stability sheet and anticipating money technology to fund development within the close to time period, Mr. Goldman set a goal of $3.30 per share. The present common is $3.51.

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“With shares buying and selling at 4.7 occasions EV/EBITDA on our 2023 estimates and internet debt to EBITDA sitting at 2.8 occasions, we imagine debt compensation and enhanced capital returns might result in a optimistic re-rate and accrue sizable features for fairness holders,” he stated.

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Believing the chance/reward proposition has moved in its “favour” as world rig counts enhance and North American rig utilization tightens, RBC Dominion Securities analyst Keith Mackey upgraded Ensign Power Companies Inc. (ESI-T) to “outperform” from “sector carry out.”

He made the transfer after elevating his U.S. rig depend forecast for 2022 by 6 per cent (to 675) and 2023 by 4 per cent (to 750), calling the market “constructive.”

“We see alternative for Ensign to re-price a robust portion of its rig fleet as super-spec rig utilization creeps above 80 per cent within the coming months,” stated Mr. Mackey. “When Ensign introduced its 4Q21 leads to March, it had about 12 rigs beneath contract for over 6 months, leaving alternative to re-price the vast majority of its 88 rig fleet close to prevailing charges, which have prolonged into the mid US$20k/day vary. We anticipate all land drillers beneath protection to learn from this dynamic, although Ensign’s monetary leverage and restricted capital funding ought to enlarge the impact on its money technology.”

Additionally touting the potential advantages from market consolidation in Canada and expressing elevated confidence in its monetary liquidity, he raised his goal to $6 from $3.25 after rising his a number of on improved EBITDA margin expectations and stability sheet leverage. The typical on the Road is $4.58.

“Ensign ought to generate significant FCF within the subsequent upcycle, by means of income and margin enlargement coupled with comparatively restricted new capital funding, in our minds,” stated Mr. Mackey.

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Regardless of believing its long-term potential “stays compelling,” ATB Capital Markets analyst Tim Monachello lowered Questor Expertise Inc. (QST-X) to “underperform” from “sector carry out, ” seeing “dislocation” from an accelerating vitality market as its rental fleet utilization has been “meaningfully dislocated from rising area exercise ranges.”

On Wednesday, the Calgary-based clean-air expertise firm reported weaker-than-anticipated fourth-quarter 2021 outcomes, prompting Mr. Monachello to “considerably” cut back his monetary projections.

“Whereas Questor’s sturdy stability sheet place (with roughly $13-million internet money) meaningfully limits basic draw back threat and gives it ample time to develop its longer-term strategic initiatives, the trail to near-term upside realization is meaningfully challenged, in our view,” he stated.

“QST’s challenges are amplified on a relative foundation amid an accelerating vitality providers backdrop the place most corporations are dealing with a strengthening outlook for exercise and pricing in 2022 whereas Questor’s North American leases platform struggles to achieve its footing. Long term, we proceed to imagine that methane emission discount applied sciences will see rising demand, and QST is more and more being acknowledged for its depth of information and rising portfolio of IP on this realm. Nonetheless, it stays largely unsure when this potential demand will materialize, and QST’s business execution stays considerably unproven given important structural modifications in its go-to-market technique and operations workforce by means of the downcycle.”

Along with his “extra conservative” view, Mr. Monachello reduce his goal to $1.50 from $2.25. The typical on the Road is $1.81.

“Regardless of our view that traders are possible higher served in different vitality providers sectors over the near-to-mid-term, we proceed to imagine that QST is among the many main public market gamers in methane discount expertise,” he stated. “Whereas business demand has but to materialize in earnest, we imagine a drive to decrease the environmental footprint of upstream and midstream operations should think about low-cost methane discount applied sciences as a pillar, an space the place QST continues to develop and optimize its portfolio.”

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Calling it a “confirmed high quality compounder with a profitable M&A monitor file,” Desjardins Securities analyst Gary Ho assumed protection of Boyd Group Companies Inc. (BYD-T) with a “purchase” suggestion on Thursday.

“Value negotiations with P&C insurers ought to alleviate some value pressures and enhance margins,” he stated. “We felt much more snug with the pricing tailwind after doing a little homework on the U.S. auto insurance coverage area. A unfavourable 20-per-cent resetting of 2022 consensus forecasts (final 5 months) and a doubtlessly bigger M&A chance supply upside, in our view.”

“Why we just like the story. (1) Reopening ought to enhance driving exercise and normalize provide chain points (elements challenges are transitory); (2) early successes from negotiations with P&C insurers on DRP worth will increase, with extra pricing modifications to comply with, which ought to enhance the highest line and gross margins. Allstate’s current investor name was centered on the present auto insurance coverage local weather and reassured us of BYD’s capability to ask for future price will increase, albeit with a time lag; (3) single-shop/small MSOs and bigger M&A targets are more likely to assist BYD’s goal of doubling the enterprise by 2025. BYD has ample dry powder (US$561-million of accessible credit score and US$28-million of money at year-end 2021) and versatile covenants till 2023; (4) a resetting of 2022 and 2023 expectations and valuations current a compelling set-up for 2H22.”

Mr. Ho has a $225 goal for Boyd shares. The present common is $206.38.

“Our funding thesis: (1) a top quality compounder with a historical past of delivering SSSG [same-store sales growth] and sturdy ROIC [return on invested capital]; (2) confirmed and disciplined M&A monitor file in a fragmented US$40-billion business; (3) with scale (#2 participant in North America), BYD enjoys a aggressive benefit (elements procurement, DRP, OEM certification, and so forth); and (4) a stable stability sheet with US$560-million-plus of accessible credit score to execute on its M&A method,” he stated.

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In a separate word, Mr. Ho assumed protection of Parkland Corp. (PKI-T) with a “purchase” ranking, seeing it as “a high-quality and well-managed firm which is well-positioned for a post-COVID-19 restoration and powerful development pipeline.”

“We don’t imagine the stable fundamentals are mirrored within the valuation, with the shares buying and selling close to trough valuation (7.2 occasions 2022 EBITDA),” he stated. “In our view, two issues ought to assist enhance valuation. Whereas they may possible take a while to materialize, we imagine affected person traders ought to be rewarded.

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“1. Traders in search of different enticing alternatives because the vitality rally eases (timing is unsure). Though PKI is within the vitality index, it doesn’t profit as a lot from rising vitality costs as upstream corporations. We imagine PKI will profit from funds movement as soon as the vitality rally eases and traders refocus on PKI’s sturdy EBITDA development and enticing FCF yield (10 per cent). 2. Traders recognizing vitality transition is manageable and never an existential risk. We imagine Norway serves as a real-life instance, with the influence on standard gas consumption from rising EV adoption being very gradual. Though EV penetration skyrocketed from 0 per cent in 2011 to 23 per cent in 2021, fossil gas demand declined by solely 0.6-per-cent CAGR [compound annual growth rate]. We imagine PKI is well-positioned to capitalize on vitality transition.”

Anticipating “affected person traders ought to be rewarded,” he set a $49 goal. The typical is $48.46.

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Canaccord Genuity analyst Aravinda Galappatthige expects to see a “continued sturdy rebound” in wi-fi when Rogers Communications Inc. (RCI.B-T) declares its first-quarter 2022 on April 20.

He’s projecting income to develop 4.4 per cent year-over-year to $3.642-billion, pushed by its wi-fi providers and media revenues. His EBITDA estimate is $1.475-billion, up 6.1 per cent whereas “media profitability continues to be a drag on the general outcomes.”

“We anticipate [wireless] service revenues to rise a strong 6.4 per cent (recall Q1/21 was down 6 per cent) to $1.712-billion, supported by weak comp, continued restoration in roaming revenues (This fall/21 was at 78 per cent of the pre-pandemic ranges) and powerful subs,” he stated. “Nonetheless, that is nonetheless 2 per cent beneath pre-pandemic ranges. On EBITDA, we forecast 6.3-per-cent development to $1.077-billion, implying a wholesome service margin of 63 per cent. This represents encouraging progress given the 55-60 per cent we’ve seen usually for Q1. That stated, sustainability of those margins will likely be intently watched, as extra restart prices are available. Wi-fi aggressive depth stays rational and manageable with the entry level for the limitless plans raised to $85 (from $80) by the incumbents. On the subs entrance, we now have 49.7k postpaid cellphone internet provides. We imagine that Rogers’ current energy in postpaid subs may need benefited from Shaw’s current weak spot. Shaw’s Q2/F22 wi-fi postpaid internet provides had been solely 8.6k (in comparison with 75k final 12 months). With Shaw wi-fi specializing in profitability over subs on this interim interval, we anticipate a continued profit to Rogers. We even have blended ARPU development at 2.8 per cent year-over-year. For Q2, we anticipate constructive steerage as a result of aforesaid elements in addition to continued restoration in foot visitors to shops.

Sustaining a “maintain” suggestion for Rogers shares, Mr. Galappatthige raised his goal to $69 from $65. The typical is $74.27.

“Whereas the inventory’s current outperformance (up greater than 20 per cent year-to-date) benefited from macro elements, which primarily drove a tilt available in the market towards defensive sectors (like Telecom), we proceed to take care of our HOLD primarily based on 1) lagging restoration in wi-fi high line, 2) a levered stability sheet put up Shaw acquisition, and three) continued smooth cable subs,” he stated.

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In different analyst actions:

* In a first-quarter earnings preview for Canadian life insurance coverage corporations, Desjardins Securities analyst Doug Younger reduce his Nice-West Lifeco Inc. (GWO-T) goal to $40 from $42 with a “maintain” ranking. The typical is $41.78.

“In our opinion, 1Q22 will likely be a tricky quarter for the lifecos in mild of assorted COVID-19 pressures within the U.S. and Asia, and in contrast to final quarter, wealth and asset administration outcomes is not going to save the day,” he stated. “That stated, we view the COVID-19 headwinds as transient, and in our opinion the setup for the lifecos in 2H22 appears to be like promising, with potential advantages from greater rates of interest and from previous acquisitions. May we get extra particulars on the potential influence from adopting IFRS 17 in 2023? Unlikely, in our view. We tweaked our estimates (though we view 2023 estimates as ineffective in mild of pending accounting modifications).”

* Nationwide Financial institution Monetary analyst Adam Shine lowered Shaw Communications Inc. (SJR.B-T) to “sector carry out” from “outperform” with a $40.50 goal, exceeding the $40.36 common on the Road.

* Nationwide Financial institution’s Cameron Doerksen raised his Air Canada (AC-T) goal to $31 from $29, reiterating an “outperform” ranking. The typical is $30.

* Stifel’s Robert Fitzmartyn raised his ARC Sources Ltd. (ARX-T) goal to $25.25 from $20.25 with a “purchase” ranking. The typical is $21.33.

* CIBC World Markets’ Kevin Chiang elevated his Canadian Nationwide Railway Co. (CNR-T) goal to $169 from $165 with a “impartial” ranking. The typical is $163.42.

* Mr. Chiang reduce his TFI Worldwide Inc. (TFII-N, TFII-T) goal to US$115, falling beneath the US$123.90 consensus, from US$130 with an “outperformer” ranking.

* Following Wednesday’s announcement of its acquisition of London-based Tictrac Ltd., Nationwide Financial institution’s Endri Leno raised his Dialogue Well being Applied sciences Inc. (CARE-T) goal to $12.25 from $11.50 with an “outperform” ranking. Others making modifications embrace: CIBC’s Scott Fletcher to $9.50 from $9 with an “outperformer” ranking and TD Securities’ David Kwan to $8.50 from $8 with a “purchase” ranking. The typical is $10.03.

“Though there are some notable challenges forward with the Tictrac acquisition, together with platform integration and delivering on its monetary targets, we just like the acquisition, as amongst different issues, Tictrac’s wellness platform fills a key gap in Dialogue’s providing,” stated Mr. Kwan. “Ought to the combination go effectively and Tictrac meet/ exceed its lofty monetary outlook, we imagine paying lower than 4 occasions ARR for what could be a quickly rising firm with very excessive margins could be an incredible discount.”

* Stifel’s Cody Kwong hiked his Enerplus Corp. (ERF-T) goal to $26.50 from $24 with a “purchase” ranking. The typical is $20.17.

“Enerplus hosted an in-person investor presentation the place it centered on the deserves on the economics, operations, and sustainability of its North Dakota Bakken play,” he stated. “We got here away with the idea that the market is considerably underestimating the depth and high quality of its stock in addition to the method/controls the corporate has in place to extract the utmost worth out of its property. The Firm’s clear imaginative and prescient and considerate execution solely reaffirms our view that Enerplus is a Prime Thought within the North American E&P panorama.”

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* CIBC’s Krista Friesen assumed protection of Trade Revenue Corp. (EIF-T) with a “impartial” ranking and goal of $47, up from the agency’s earlier $44 goal however beneath the $52.09 common,

“EIF’s earnings and money movement stream have exhibited a higher degree of resiliency versus its pure-play friends, reflecting the advantages of its diversification technique,” she stated.

* Stifel analyst Stephen Soock initiated protection of Montreal-based Monarch Mining Corp. (GBAR-T) with a “speculative purchase” ranking and $1.50 goal. The typical is $1.40.

“Monarch Mining is about to be the latest gold producer within the Abitibi,” he stated. “After refurbishing the Beaufor mine and totally permitted Beacon mill, the corporate is on monitor to ramp as much as 50koz/yr at an AISC of $1,221/oz by 2024. It will produce $18-million per 12 months in FCF to fund the restart of manufacturing on the Croinor mine (further 40koz/yr) and advance useful resource enlargement drilling at depth at each operations. In parallel, the corporate plans to proceed to actively discover the close by McKenzie Break and Swanson properties which collectively already host 521koz of assets. Administration has a wonderful monitor file of worth creation (as Monarch Gold) and a wealth of M&A expertise on the GBAR board. The inventory trades at spot P/NAV of simply 0.28 occasions vs 100koz/yr producer friends at 0.46 occasions.”

* Nationwide Financial institution’s Rupert Merer elevated his goal for Northland Energy Inc. (NPI-T) by $1 to $45 with an “outperform” ranking. The typical is $46.17.

* Benchmark initiated protection of Shopify Inc. (SHOP-N, SHOP-T) with a “maintain” ranking.

* Nationwide Financial institution’s Shane Nagle initiated protection of Solaris Sources Inc. (SLS-T) with an “outperform” ranking and $20 goal. The typical is $20.70.

* JP Morgan’s Michael Glick raised his Stelco Holdings Inc. (STLC-T) goal to $67 from $62 with an “obese” ranking, whereas RBC’s Alexander Jackson elevated his goal to $61 from $60 with a “sector carry out” ranking. The typical is $59.88.

“We anticipate a stable quarter for Stelco, albeit down in comparison with This fall, on decrease metal costs and gross sales volumes. HRC costs had been falling by means of Q1 earlier than rebounding in March on a return of consumers and elevated uncooked materials prices, and we anticipate Stelco exited the quarter with a a lot fuller order ebook than it entered. We enhance our HRC forecasts, which are actually inline with consensus and lead to our worth goal transferring to $61,” stated Mr. Jackson.

* Credit score Suisse’s Curt Woodworth raised his Teck Sources Ltd. (TECK.B-T) goal to $58 from $49.53, exceeding the $55.38 common, with an “outperform” ranking.

“We proceed to view Teck as the perfect mining decide in our protection and imagine the inventory is underappreciated by the market regardless of having the perfect development potential vs. its friends,” he stated. “With coking coal costs staying at elevated ranges (spot at $500 per ton), Teck ought to reap a windfall FCF achieve over the following a number of quarters, which ought to put the stability sheet in place to simply fund the stable pipeline of potential development initiatives. TECK also needs to profit from sturdy copper costs with its annual copper output estimated to double by 2023. Trying forward, we see completion of QB2 mission and any potential announcement of stake sale vitality property as the important thing catalysts for the inventory. We imagine QB2 is now de-risked put up the current 10-per-cent capex increase and TECK is effectively positioned to learn from greater costs /copper development.”

* BMO’s Stephen MacLeod raised his Tricon Residential Inc. (TCN-T) goal to $23 from $22.50, exceeding the $20.95 common, with an “outperform” ranking.

“We got here away from Tricon’s investor day with confidence in its SFR [single-family rental] development alternatives, differentiated partnership mannequin and energy of its tech-enabled working platform,” he stated. “We imagine Tricon is well-positioned to drive 15-per-cent annual core FFOPS [funds from operations per share] development by means of 2024, with enough liquidity and development tailwinds. We imagine that creeping unfavourable sentiment in the direction of the business is misplaced; because it pertains to Tricon, overlooking its function as a housing supplier and contributor to housing provide. We see an extended runway for development.”

* Raymond James’ Steven Li initiated protection of Verticalscope Holdings Inc. (FORA-T) with an “outperform” ranking and $32 goal, beneath the $33.51 common.

“Fanatic communities (boards, apps, or marketplaces) create useful on-line content material every day that has inherent business worth. As a robust aggregator and operator of fanatic communities (1200+ communities, 113 mln+ month-to-month energetic customers [MAU] and 56 mln+ registered customers), we imagine VerticalScope stands to learn each organically (greater monetization, new platform) and inorganically (greater than 20-per-cent synergies on common),” he stated.

* Canaccord Genuity’s Yuri Lynk raised his goal for Xebec Adsorption Inc. (XBC-T) to $2.50 from $2.25, reiterating a “maintain” suggestion, whereas Raymond James’ . The typical is $3.06.

“We imagine Xebec is effectively positioned to learn from the elevated demand for renewable gases that we see evolving from the vitality transition,” he stated. “This development potential was evident in administration’s strategic three-year plan launched final month. Nonetheless, we stay on the sidelines as we await indicators of improved execution, particularly with enter value inflation and logistical points more likely to weigh on Q1/2022. Presently, Xebec trades at 2.1 occasions EV/Gross sales (2022E) versus industrial gasoline friends at 2.5 occasions. We set our goal utilizing 1.8 occasions EV/Gross sales (2023E) down from 2.0 occasions beforehand. The discount in our goal a number of displays our concern Xebec could wrestle to profitably exchange this carbon seize order when it rolls off subsequent 12 months and the execution threat related to such a big contract.”