bmo_research highlights apr 8

8/9/2019 BMO_Research Highlights Apr 8

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April 8, 2010

TODAY'S HIGHLIGHTS

U.S. Canadian / Int'l

Initiating Coverage Killam Properties

Rating Upgrades EOG Resources

Rating Downgrades Centerra Gold

Estimates/Targets Raised Pacific Northern Gas

Matrikon

Gennum

Estimates/Targets Lowered Talisman Energy

Featured ReportsKillam Properties: Initiating Coverage at Outperform; Greater Size...

FINANCIALS

CDN REITs Canada Killam Properties Initiating Coverage at Outperform; Greater Size...

ENERGY & UTILITIES

North American E&P U.S. EOG Resources Eagle Ford Taking Flight; Upgraded to Market Perform

North American E&P Canada Talisman Energy Non-Core Asset Sales Continue

Electric Util. & Ind. Power Canada Pacific Northern Gas Hydro Acquisition Announced; Market Perform Rating...

MATERIALS

Precious Metals Canada Centerra Gold Downgraded to Market Perform, Target Lowered; Kyrgyz...

Fertilizers Canada Potash One Protecting the Schedule

TECH/TELECOM/MEDIA

Software Canada Matrikon Q2/10: Strong Execution, Continued Visibility

Semiconductors U.S. NVIDIA Analyst Day - Vision Is Compelling

Specialty Hardware Canada Gennum Revenue Above Forecast
http://research-ca.bmocapitalmarkets.com/documents/9DD298CC-762F-417C-8AEC-127C36F62A8C.pdfhttp://research-ca.bmocapitalmarkets.com/documents/27027FFD-7840-4444-B5F1-3D1A6F9A32C2.pdfhttp://research-ca.bmocapitalmarkets.com/documents/2EF3D93E-87DA-4402-81FE-2216BF0B375A.pdfhttp://research-ca.bmocapitalmarkets.com/documents/05FA74FC-8E9B-4C42-B846-C89A24BBA606.pdfhttp://research-ca.bmocapitalmarkets.com/documents/1EB9F9E3-4535-43D9-A049-950E6D90B546.pdfhttp://research-ca.bmocapitalmarkets.com/documents/6E41881A-AFB1-43A1-ADC4-388FD305ACB5.pdfhttp://research-ca.bmocapitalmarkets.com/documents/AF349562-4416-4DB3-882D-25A33EAA49AB.pdfhttp://research-ca.bmocapitalmarkets.com/documents/88CDC1B9-8A48-41D1-8E94-4226BF407454.PDFhttp://research-ca.bmocapitalmarkets.com/documents/88CDC1B9-8A48-41D1-8E94-4226BF407454.PDFhttp://research-ca.bmocapitalmarkets.com/documents/27027FFD-7840-4444-B5F1-3D1A6F9A32C2.pdfhttp://research-ca.bmocapitalmarkets.com/documents/AF349562-4416-4DB3-882D-25A33EAA49AB.pdfhttp://research-ca.bmocapitalmarkets.com/documents/05FA74FC-8E9B-4C42-B846-C89A24BBA606.pdfhttp://research-ca.bmocapitalmarkets.com/documents/2EF3D93E-87DA-4402-81FE-2216BF0B375A.pdfhttp://research-ca.bmocapitalmarkets.com/documents/36186BC3-E281-43DD-B241-F7AF7ECEFB15.pdfhttp://research-ca.bmocapitalmarkets.com/documents/1EB9F9E3-4535-43D9-A049-950E6D90B546.pdfhttp://research-ca.bmocapitalmarkets.com/documents/C2137CF7-6F43-4D80-9595-A9413796D53A.pdfhttp://research-ca.bmocapitalmarkets.com/documents/6E41881A-AFB1-43A1-ADC4-388FD305ACB5.pdfhttp://research-ca.bmocapitalmarkets.com/documents/6E41881A-AFB1-43A1-ADC4-388FD305ACB5.pdfhttp://research-ca.bmocapitalmarkets.com/documents/C2137CF7-6F43-4D80-9595-A9413796D53A.pdfhttp://research-ca.bmocapitalmarkets.com/documents/1EB9F9E3-4535-43D9-A049-950E6D90B546.pdfhttp://research-ca.bmocapitalmarkets.com/documents/36186BC3-E281-43DD-B241-F7AF7ECEFB15.pdfhttp://research-ca.bmocapitalmarkets.com/documents/2EF3D93E-87DA-4402-81FE-2216BF0B375A.pdfhttp://research-ca.bmocapitalmarkets.com/documents/05FA74FC-8E9B-4C42-B846-C89A24BBA606.pdfhttp://research-ca.bmocapitalmarkets.com/documents/AF349562-4416-4DB3-882D-25A33EAA49AB.pdfhttp://research-ca.bmocapitalmarkets.com/documents/27027FFD-7840-4444-B5F1-3D1A6F9A32C2.pdfhttp://research-ca.bmocapitalmarkets.com/documents/88CDC1B9-8A48-41D1-8E94-4226BF407454.PDFhttp://research-ca.bmocapitalmarkets.com/documents/88CDC1B9-8A48-41D1-8E94-4226BF407454.PDFhttp://research-ca.bmocapitalmarkets.com/documents/AF349562-4416-4DB3-882D-25A33EAA49AB.pdfhttp://research-ca.bmocapitalmarkets.com/documents/6E41881A-AFB1-43A1-ADC4-388FD305ACB5.pdfhttp://research-ca.bmocapitalmarkets.com/documents/1EB9F9E3-4535-43D9-A049-950E6D90B546.pdfhttp://research-ca.bmocapitalmarkets.com/documents/05FA74FC-8E9B-4C42-B846-C89A24BBA606.pdfhttp://research-ca.bmocapitalmarkets.com/documents/2EF3D93E-87DA-4402-81FE-2216BF0B375A.pdfhttp://research-ca.bmocapitalmarkets.com/documents/27027FFD-7840-4444-B5F1-3D1A6F9A32C2.pdfhttp://research-ca.bmocapitalmarkets.com/documents/9DD298CC-762F-417C-8AEC-127C36F62A8C.pdf


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Real Estate& REITs

April 7, 2010Toronto, Ontario

Garreth MacRae(416) [email protected]

Karine MacIndoe(416) [email protected]

This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s)under FINRA rules. For disclosure statements, including the Analysts Certifcation, please re er to pages 48 to 51.

Killam Properties(KMP TSX)

Stock Rating: Outper orm

Industry Rating: Market Per orm

Initiating Coverage at Outper orm; GreaterSize, Diversifcation, & Growth ShouldContinue to Drive Superior Returns

Price (1 Apr) $8.27 52-Week High $9.50

Target Price $9.25 52-Week Low $4.84

(FY Dec) 2009A 2010E 2011EFFO $0.72 $0.74 $0.77P/FFO 11.2x 10.7x

AFFO $0.54 $0.57 $0.61P/AFFO 14.4x 13.6x

Dividends $0.56 $0.56 $0.56AFFO Payout Ratio 103.8% 97.6% 92.2%NOI/Gross Inv. In Prop. 7.8% 7.9% 7.8%EV/EBITDA na 14.8x 14.8x

Dividend $0.56 Yield 6.8%NAV $9.28 Prem/(Disc) to NAV -10.9%

Shares O/S (mm) 44.8 Mkt. Cap ($mm) $370Float O/S (mm) 44.8 Float Cap ($mm) $370

Notes: All values in C$

Highlights

Killam Properties Inc. is a TSX-listed corporation which owns 118multi-residential properties (8,977 units) concentrated in AtlanticCanada, and 55 manufactured home communities (MHCs; 9,290 sites)in Ontario, Atlantic Canada and Western Canada. By property type,75% of net operating income (NOI) is derived from Apartments and25% from MHCs. By geography, 45% of NOI comes from Nova Scotia,30% from New Brunswick, 10% from Ontario, 6% from Prince EdwardIsland, 6% from Newfoundland and 3% from Western Canada.

We are forecasting fully-diluted Adjusted Funds From Operations (AFFO)per share of $0.57 and $0.61 in 2010E and 2011E, respectively, re ecting6% growth (CAGR 2009-2011E). Our forecasts assume acquisitions of$150 million of apartments in each of 2010 and 2011 (6.25% average cap.rate), same-property NOI growth of 2-3% in 2010-2011, and nancing/re nancing rates of 4.0-4.5% for apartments/5.5-6.25% for MHCs. Weassume $50 million in equity will be raised in 2011 to fund acquisitions.

Killam trades at a 2010E AFFO multiple of 14.4x (7.2% implied cap.rate), which compares with a weighted-average of 14.5x for all CanadianREITs and an average 17.2x for Canadian Multi-Residential REITs.

Killam offers investors the opportunity to own part of a midsize-and-growing portfolio of multi-residential and MHC propertieslocated primarily in Atlantic Canada and Ontario. Killams strong/entrepreneurial management team, greater-than-average internal/external growth potential (enhanced with a just-announced joint venturewith Kuwait Finance House for up to $450mm) and leading market sharein Atlantic Canada provide a compelling investment opportunity. Weare initiating coverage of Killam Properties Inc. with an Outperformrating and a $9.25 target price based on 15x our 2011E AFFO.

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Killam Properties Inc. (KMP)Price: High,Low,Close

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This report was prepared by an analyst(s) employ d as a research analyst(s) underFINRA rules. For disclosure statements, including

EOG Resources(EOG-NYSE)

Stock Rating: Market PerformIndustry Rating: Market Perform

April 8, 2010Research CommentCalgary, Alberta

Jim Byrne, P.Eng., CFABMO Nesbitt Burns Inc.(403) [email protected]: Graham Cooke, CFA

Price (7-Apr) $103.74 52-Week High $103.74Target Price $100.00 52-Week Low $54.86Eagle Ford Taking Flight; Upgraded to Market

Perform EOG Resources Inc. (EOG)Price: High,Low,Close(US$)

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EOG highlighted its 580,000 net acre position in the Eagle Ford shale, whichmay contain as much as 900 million boe (87% liquids). Driven by this positionand other oil-weighted plays, the company raised its production growth targetsfor 2011 and 2012 to 19% and 21%, respectively. The company announced a2010 capital budget of $5.1 billion, in line with our estimate but 35% above2009 spending and roughly $1.8 billion above our 2010 estimated cash flow. Tofund this shortfall, the company will divest roughly $1.0 to $1.5 billion of non-core North American assets in late 2010 or early 2011.

ed by BMO Nesbitt Burns Inc., and who is (are) not registerethe Analyst's Certification, please refer to pages 7 to 10.

ImpactPositive.

ForecastsOur 2010 financial estimates are unchanged but our 2011 CFPS and EPSestimates have been raised significantly to reflect the companys higher-than-anticipated growth targets.

ValuationEOGs trades at 8.3x 2010 estimated cash flow and an EV/EBITDA of 9.4x, apremium to the Senior E&P median. In light of guidance for higher growthrates, its premium valuation appears justified. However, we believe capital

constraints will limit any further upside and that the company is reasonablyvalued at current levels. Our target price of $100 is supported by our 2010estimated NAV of $100.47.

RecommendationWe are upgrading EOG to Market Perform from Underperform.

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Last Data Point: April 5, 2010

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(FY-Dec.) 2008A 2009A 2010E 2011ECFPS $17.33 $11.62 $12.45 $18.07P/CFPS 8.3x 5.7x

EPS $7.50 $3.00 $2.72 $5.54P/E 38.1x 18.7x

NAV $52.01 $90.76 $100.47 $106.01EV/EBITDA 3.5x 10.6x 9.4x 6.3xROCE (%) 21% 7% 6% 12%D

/CF 0.3x 0.8x 1.3x 0.9x

Quarterly CFPS Q1 Q2 Q3 Q42008A $4.22 $5.24 $4.53 $3.422009A $2.70 $2.96 $3.04 $2.922010E $2.65 $2.39 $3.06 $4.35

Dividend $0.62 Yield 0.6%Book Value $39.59 Price/Book 2.6x

Shares O/S (mm) 252.5 Mkt. Cap (US$mm) $26,194Float O/S (mm) 195.3 Float Cap (US$mm) $20,261Wkly Vol (000s) 14,334 Wkly $ Vol (USmm) $1,148.0Net Debt ($mm) $2,266.0 Next Rep. Date May (E

Notes: All values in US$; EPS (diluted), CFPS (diluted discretionary)Major Shareholders: Davis Selected (8.3%), AXA (7.6%), WellingtonMgmt (6.7%)First Call Mean Estimates: EOG RESOURCES INC (US$) 2010E:$3.10; 2011E: $5.99

Changes Annual EPS Annual CFPS Target 2011E $4.34 to $5.54 2011E $15.56 to $18.07 $83.00 to $100.00

RatingUnd to Mkt


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Talisman Energy(TLM-TSX; TLM-NYSE)

Stock Rating: OutperformIndustry Rating: Market Perform

Member of: Top 15 Value Stock Selections

April 7, 2010Research CommentCalgary, Alberta

Randy OllenbergerBMO Nesbitt Burns Inc.(403) [email protected]: Matthew Brink

Price (7-Apr) $17.40 52-Week High $20.86Target Price $21.00 52-Week Low $13.12Non-Core Asset Sales Continue

Talisman Energy (TLM)Price: High,Low,Close

EventTalisman announced it has entered into five separate transactions to sell anumber of non-core assets in Canada for $1.9 billion. The sale includes roughlyone million net acres of land in the greater Peace River Arch, central AlbertaFoothills and greater Hinton area in Alberta with current production of roughly42,500 boe/d (90% natural gas) and net proved reserves of 120 MMboe. 5

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ImpactMixed.

ForecastsWe are revising our financial and operating estimates to reflect the asset sales.We are lowering our cash flow per share estimates to $3.65 from $3.75 in 2010

and to $4.25 from $4.53 in 2011, primarily reflecting the resultant lowerproduction levels. Our outlook now assumes that production averages 400,977boe/d in 2010 and rises to 418,626 boe/d in 2011 with additions from NorthAmerican unconventional gas, the North Sea and Southeast Asia.

ValuationWe believe Talisman shares are very attractively valued reflecting a 42%discount to our 2010 net asset value estimate of $29.76 and modest 2010EEV/EBITDA multiple of 4.4x. In our opinion, the ongoing restructuring of thecompany should generate additional shareholder value that would support apositive revaluation of the shares; however, the company likely needs to make ameaningful acquisition to fully deliver on its strategy. Our $21 target priceincorporates a 2010E EBITDA multiple of 5.2x and a 29% discount to our 2010NAV estimate.

RecommendationWe continue to rate Talisman shares Outperform.

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(FY-Dec.) 2008A 2009A 2010E 2011ECFPS $5.70 $3.78 $3.65 $4.25P/CFPS 4.8x 4.1x

EPS $2.64 $0.63 $0.32 $0.93P/E 54.4x 18.7x

NAV $27.54 $28.08 $29.76 $34.03EV/EBITDA 2.2x 4.8x 4.5x 3.8xROCE (%) 26% 5% 3% 7%D/CF 0.7x 1.0x 0.9x 0.8x

Quarterly CFPS Q1 Q2 Q3 Q42008A $1.15 $1.57 $1.58 $1.482009A $1.27 $0.84 $0.79 $0.912010E $0.89 $0.94 $0.92 $0.91 Dividend $0.23 Yield 1.3%Book Value $10.95 Price/Book 1.6x

Shares O/S (mm) 1,014.8 Mkt. Cap ($mm) $17,658Float O/S (mm) 1,014.4 Float Cap ($mm) $17,651Wkly Vol (000s) 34,445 Wkly $ Vol (mm) $584.5Net Debt ($mm) $3,217.0 Next Rep. Date Apr (E

Notes: All values in C$; EPS (diluted), CFPS (diluted discretionary)Major Shareholders: Jarislowsky Fraser (6.41%)First Call Mean Estimates: TALISMAN ENERGY INC (C$/CF)2010E: na; 2011E: na

Changes Annual EPS Annual CFPS Quarterly CFPS 2010E $0.27 to $0.32 2010E $3.75 to $3.65 Q1/10E $0.88 to $0.89 2011E $0.89 to $0.93 2011E $4.53 to $4.25 Q2/10E $0.93 to $0.94

Q3/10E $1.07 to $0.92 Q4/10E $0.87 to $0.91


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Pacific Northern Gas(PNG-TSX)


April 7, 2010Research CommentToronto, Ontario

Michael McGowan, CA, CFABMO Nesbitt Burns Inc.(416) [email protected]: Mark Laing, CA

Hydro Acquisition Announced;Market Perform Rating Maintained

Price (7-Apr) $22.70 52-Week High $23.96Target Price $20.00 52-Week Low $11.93


EventPacific Northern Gas announced that it has acquired a 97% interest in the 9.8

MW McNair Creek run of river hydro facility for $17 million ($1,735/kW).The acquisition will be financed through the assumption of existing debt(approximately $9.4 million) and utilization of the companys existing creditfacility. After the acquisition is complete, PNGs debt-to-capitalization ratio isexpected to increase to approximately 51%, up from approximately 46.5% at theend of Q4/09. The McNair Creek project was awarded a 20-year PPA with BCHydro in 2001 and the facility was commissioned on November 3, 2004.Expected annual electricity production from the plant is 3032 GWh.

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ImpactMixed. We believe this project is a first step in an attempt to diversify PNGs

earnings away from its core regulated natural gas distribution system, which hasexperienced declining volumes. Although McNair Creek is expected to beaccretive to earnings and cash flow, we believe it could reduce the companysattractiveness as a pure-play pipeline company, should the KSL project proceed.

ForecastsWe have updated our model to reflect the acquisition. Our diluted EPS estimatesincrease to $1.89 from $1.88 in 2010E and to $1.90 from $1.86 in 2011E.

ValuationWe are increasing our target price slightly to $20 from $19.50. Our $20 pricetarget is based on a weighted valuation approach: 13x 2011E diluted EPS of $1.90 (12.5%); 1.0x 2011E BVPS of $25.62 (12.5%); and a 6.25% dividendyield applied to 2011E DPS of $1.12 (75%).

RecommendationAt current levels, we believe shares are reasonably valued. Our rating is MarketPerform.

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(FY-Dec.) 2008A 2009A 2010E 2011EEPS $1.52 $1.71 $1.89 $1.90P/E 12.0x 11.9x

CFPS $4.59 $5.25 $4.99 $5.05P/CFPS 4.5x 4.5x

Div. $0.88 $0.96 $1.12 $1.12EV ($mm) $147 $141 $164 $160EBITDA ($mm) $23.6 $22.8 $24.9 $24.7E

V/EBITDA 6.2x 6.2x 6.6x 6.5x

Quarterly EPS Q1 Q2 Q3 Q42008A $1.21 -$0.08 -$0.44 $0.842009A $1.38 -$0.13 -$0.49 $0.952010E $1.48 -$0.03 -$0.51 $0.96


Shares O/S (mm) 3.5 Mkt. Cap ($mm) $80Float O/S (mm) 3.5 Float Cap ($mm) $80Wkly Vol (000s) 23 Wkly $ Vol (mm) $0.4Net Debt ($mm) $74.6 Next Rep. Date 30-Apr (E

Notes: All values in C$; Estimates are weather normalMajor Shareholders: Widely heldFirst Call Mean Estimates: PACIFIC NORTHERN GAS LTD 'A' (C$)2010E: $1.88; 2011E: $1.86

Changes Annual EPS Annual CFPS Quarterly EPS Target 2010E $1.88 to $1.89 2010E $4.90 to $4.99 Q2/10E -$0.07 to -$0.03 $19.50 to $20.00

2011E $1.86 to $1.90 2011E $4.89 to $5.05 Q3/10E -$0.47 to -$0.51


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Centerra Gold(CG-TSX)

Stock Rating: Market PerformIndustry Rating: Outperform


Andrew BreichmanasBMO Nesbitt Burns Inc.(416) [email protected]

David HaughtonAssoc: Jeffrey Schok / Steven Willis

Downgraded to Market Perform, Target Lowered;Kyrgyz Civil Unrest a Reminder of Political Risks


Centerra Gold Inc. (CG)Price: High,Low,Close

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Following violent conflicts between demonstrators and police in Bishkek, mediaoutlets are reporting that the President of Kyrgyzstan has fled the capital andthat the Prime Minister has resigned. Opposition parties are reportedly in theprocess of forming a new government. The protests were apparently sparked byincreased costs and perceived corruption within the previous administration.

ImpactNegative. The company had made good progress improving relations with thegovernment and is poised to make significant investments at Kumtor in order tooptimize the asset. However, the current political situation highlights theuncertainty of the operating environment and reintroduces considerable risk.

ForecastsBMO Research forecasts are unchanged and the company indicates that Kumtoroperations have been unaffected by the civil unrest in the country thus far.

ValuationThe BMO Research valuation is unaffected, but the lower target price of C$12.50 reflects the greater near-term risk and represents a P/NPV of 1.2x usingspot prices and a 10% discount rate compared to the peer average of 1.5x.

RecommendationBMO Research is downgrading Centerra to Market Perform due to the uncertainpolitical environment in Kyrgyzstan. Given the mines importance to thecountrys economy, the states ownership stake in Centerra, and the significantinvestments planned by the company, the likelihood of the asset being affectedappears low. The stock had rerated on improved relations with the Kyrgyzgovernment, but stability must be maintained through the transition.

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(FY-Dec.) 2008A 2009A 2010E 2011EEPS $0.45 $0.48 $0.77 $0.70P/E 15.5x 17.1x

CFPS $0.81 $0.93 $1.31 $1.26P/CFPS 9.1x 9.5x

Real'd Price ($/oz) $853 $1,013 $1,150 $1,150Prod'n (000 oz.) 748.9 675.6 689.9 712.9Ttl. Cash Cost ($/oz) $483 $459 $460 $494T

tl. Prod. Cost $592 $611 $666 $701

Quarterly EPS Q1 Q2 Q3 Q42008A $0.11 $0.06 $0.08 $0.202009A -$0.09 -$0.14 $0.09 $0.602010E $0.24 $0.02 $0.06 $0.45


Shares O/S (mm) 234.9 Mkt. Cap ($mm) $2,816Float O/S (mm) 157.5 Float Cap ($mm) $1,888Wkly Vol (000s) 2,604 Wkly $ Vol (mm) $26.6Net Debt ($mm) -$322.9 Next Rep. Date May (E

Notes: Share price and capitalization in C$, all other values in US$Major Shareholders: Kyrgyzaltyn JSC (33%)First Call Mean Estimates: CENTERRA GOLD INC (US$) 2010E:$0.69; 2011E: $0.71

Changes Target $16.50 to $12.50

RatingOP to Mkt


7/12


Potash One(KCL-TSX)

Stock Rating: Outperform(S)Industry Rating: Outperform


Joel Jackson, P.Eng.BMO Nesbitt Burns Inc.(416) [email protected]

Protecting the Schedule Price (7-Apr) $2.92 52-Week High $3.87Target Price $4.00 52-Week Low $1.51


Event

Potash One announced it placed the first order for long-delivery alloyedmaterials required to fabricate key evaporator/crystallizer equipment for KCLsprospective potash mine. The order allows delivery of the equipment starting in2012, allowing KCL to stay on schedule for a Q4/13 mine commissioning. Toprotect the schedule, we estimate material orders will require $2530 millionof investment in 2010 and early 2011 (assuming KCL keeps the option of alarger 2.86 million tonne initial mine, not the 1.43 million tonne mine weenvision). We estimate the initial payment was $56 million, and additionalpayments are spaced out across the next 912 months in $36 million stages.

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Mixed. With C$35.3 million of cash as of January 31, 2010, KCL hassufficient funds through feasibility report dissemination (expected in 23months), but it might be tight to pay the remaining 2010/early 2011 materialpayments. We estimate KCL might need to raise funds later this year to keepthe project going if a strategic partner or acquirer does not materialize over thenext 36 months.

ForecastsOur capex estimate for a 1.43mm tonne solution mine (Q4/13 start) isUS$1.1B, ramping to 2.86mm by 2022 for an additional US$738mm of capex.

ValuationWe estimate a 10% NAVPS of $5.42 at US$450/t potash (fob Vancouver).

RecommendationFor the Legacy project to stay on schedule, the procurement of considerablestrategic project financing over the next 23 quarters is the key catalyst forKCL. We are maintaining our Outperform (Speculative) rating and $4 targetprice.

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Dividend $0.00 Yield 0.0%Book Value $1.07 Price/Book 2.7xShares O/S (mm) 80.8 Mkt. Cap ($mm) $236Float O/S (mm) 79.6 Float Cap ($mm) $232Wkly Vol (000s) 5,220 Wkly $ Vol (mm) $14.5Net Debt ($mm) -$35.3 Next Rep. Date Jun (E)

Notes: All values in C$; (S) in rating denotes SpeculativeMajor Shareholders: Widely heldFirst Call Mean Estimates: POTASH ONE INC (C$) 2010E: -$0.07;2011E: -$0.01


8/12


Matrikon(MTK-TSX)

Stock Rating: OutperformIndustry Rating: Market Perform


Thanos Moschopoulos, CFABMO Nesbitt Burns Inc.(416) [email protected]


Q2/10: Strong Execution, Continued Visibility


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Matrikon reported Q2/10 results that were in line with expectations. Revenueswere $22.8 million (+16% y/y) versus the consensus of $23.2 million. EPS were$0.09, or $0.07 excluding a tax recovery, in line with the consensus. Thecompany is on track with respect to delivering on its recent large project wins,with the well monitoring projects now ramping up as the U.S. power projectstarts to approach completion. Management continues to see improvement in thepipeline, as the deal win with Statoil has helped raise its profile with otherprospects, and as improved commodity prices are driving a recovery in keyverticals.

Impact

Slightly positive. The strong y/y revenue growth does not come as a surprisegiven the large deal wins in recent quarters, although the fact that the projectsare proceeding as expected is incrementally positive.

ForecastsWe have made minor changes to our model.

ValuationWe are maintaining our $4.50 target price; representing 15x P/E and 8.5xEV/EBITDA based on our FY2011 estimates.

RecommendationWe are maintaining our Outperform recommendation. We believe the stocksvaluation remains attractive, at 12x P/E currently relative to 30% FY2010Egrowth. Growth in 2011 may prove to be more challenginghowever, theimproving macro climate and the prospect for follow-on business on some of the large projects may help on this front.

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2005 2006 2007 2008 20090

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200MTK Relative to S&P/TSX Comp


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(FY-Aug.) 2008A 2009A 2010E 2011EEPS $0.29 $0.07 $0.31 $0.30P/E 11.7x 12.1x

CFPS $0.45 -$0.04 $0.34 $0.34P/CFPS 10.6x 10.6x

Rev. ($mm) $80.0 $73.2 $93.5 $95.7EV ($mm) $49 $77 $104 $103EBITDA ($mm) $13.5 $5.2 $15.1 $15.5EV/EBITDA 3.6x 14.8x 6.9x 6.6x

Quarterly EPS Q1 Q2 Q3 Q42008A $0.07 $0.06 $0.08 $0.082009A $0.09 $0.06 -$0.10 $0.022010E $0.09a $0.09a $0.07 $0.07 Dividend $0.12 Yield 3.3%Book Value $1.48 Price/Book 2.4x

Shares O/S (mm) 31.5 Mkt. Cap ($mm) $114Float O/S (mm) 13.1 Float Cap ($mm) $47Wkly Vol (000s) 129 Wkly $ Vol (mm) $0.3Net Debt ($mm) -$9.4 Next Rep. Date 08-Jul (E)

Notes: All values in C$Major Shareholders: Nizar J. Somji (32%); Crescendo (16%); othermanagement, directors & employees (4%)First Call Mean Estimates: MATRIKON, INC. (C$) 2010E: $0.30;2011E: $0.35

Changes Annual EPS Annual CFPS Quarterly EPS 2010E $0.30 to $0.31 2010E $0.25 to $0.34 Q4/10E $0.08 to $0.07 2011E $0.29 to $0.30 2011E $0.38 to $0.34


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Please r cluding the Analyst's Certification.

NVIDIA(NVDA-NASDAQ)


April 8, 201

Semiconductors

Ambrish Srivastava, PhDBMO Capital Markets Corp

[email protected]

Emily Scudder415-591-213

[email protected]

Analyst Day Vision Is Compelling Securities InfoPrice (7-Apr) $17.16 Target Price $1852-Wk High/Low $19/$8 Dividend Mkt Cap (mm) $9,721 Yield Shs O/S (mm, BASIC) 566.5 Float O/S (mm) 539.4Options O/S (mm) na ADVol (30-day, 000s) 12,388

Price Performance

EventNVIDIA presented a pretty compelling vision of its 2x2 approach. The

company is looking for growth from both its core and newer segments - theGeForce discrete graphics business and the Quadro professional business,and its newer Tegra and Tesla businesses. Operating margin targets laid outby the company are also roughly 200 bps above what we are currentlymodeling for the near and medium term.

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NVIDIA CORP (NVDA)Price: High,Low,Close(US$) Rel ative to S&P 500

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ImpactIncrementally positive. We do believe that the company is positioneduniquely to benefit from the 3-D wave, a growth driver highlighted by thecompany, which could potentially turn into something bigger as NVIDIAdoes provide an end-to-end solution from enabling content creation to

enabling delivery. While there might be some disappointment regarding thecompanys new Tegra targets, the market has likely anticipated that by now.The company appears to be seeing strong fundamentals in all its businesses,especially on the higher-margin Quadro.

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Volume (mln)

Last Data Point:April 6, 2010

Valuation/Financial Data(FY-Jan.) 2009A 2010A 2011E 2012EEPS Pro Forma $0.26 $0.24 $0.88 $1.00P/E 19.5x 17.2xFirst Call Cons. $0.94 $1.06 EPS GAAP -$0.08 -$0.15 $0.88 $1.00

FCF -$0.28 $0.73 $1.14 $1.22P/FCF 15.1x 14.1xEBITDA ($mm) $309 $98 $807 $912EV/EBITDA 9.9x 8.8xRev. ($mm) $3,425 $3,326 $4,172 $4 ,433EV/Rev 1.9x 1.8x

Quarterly EPS 1Q 2Q 3Q 4Q

ForecastsThe company also laid out its near-term and medium-term financial targets.Our numbers are currently at the lower end of the targets for gross marginsand revenues and about 200 bps below the lower end for operating margins.

2010A -$0.15 $0.02 $0.13 $0.232011E $0.20 $0.20 $0.24 $0.25

Balance Sheet Data ( 01/29/10 )

Net Debt ($mm) -$1,703 TotalDebt/EBITDA 0.0xTotal Debt ($mm) $26 EBITDA/IntExp naNet Debt/Cap. nm Price/Book 3.6xNotes: Quarters may not total due to rounding. All values in US$.Source: BMO Capital Markets estimates, Bloomberg, FactSet, GlobalInsight, Reuters, and T homson Financial.

ValuationOur price target of $18 is based a P/E multiple of 18x our FY2012 (CY2011)EPS estimate of $1.00.

RecommendationWe rate NVDA shares MARKET PERFORM .

efer to pages 8 to 11 for Important Disclosures, in


10/12


Gennum(GND-TSX)

Stock Rating: UnderperformIndustry Rating: Market Perform


Brian Piccioni, CFABMO Nesbitt Burns Inc.(416) [email protected]: Rami Nasser


Revenue Above Forecast


0.0

0.1

0.20.3

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Gennum Corp. (GND)Price: High,Low,Close Earnings/Share(US$)

Event

Q1/10 revenue was $29.5 million, up 52% y/y and 18% sequentially, above ourestimate of $27.6 million and the First Call Mean of $27.6 million.

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ImpactSlightly Positive.

ForecastsWe have increased our Q2/10 revenue forecast from $23.3 million to $26.2million and our EPS forecast from $0.05 to $0.08.

ValuationA price/earnings of 20x our F2010 EPS forecast adjusted for expensing R&Dyields a target price of $4.80.

RecommendationGennum reported Q1/10 results that were well above our expectations. Weremain cautious with respect to the sustainability of the recovery given thehealth of the broadcast equipment manufacturing sector. The ongoing, andapparently increasing, deferral of R&D expense as permitted by GAAP butunusual in the semiconductor sector has the effect of making Gennumsincome measures look somewhat more attractive than comparable firms unless

adjusted. In additional, though having no impact on EBT Margin, IP revenuedistorts gross margin as related costs are billed to R&D, not costs of goods sold.Gennum reported better than forecast results, and their outlook, in particular forQ2/10 is better than our forecasts. We retain our Underperform rating, but areincreasing our target price to $4.80 from $4.40.

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2005 2006 2007 2008 20090

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(FY-Nov.) 2008A 2009A 2010E 2011EEPS $0.53 $0.06 $0.32 $0.28P/E 20.2x 23.1x

CFPS $0.51 -$0.29 $0.43 $0.39P/CFPS 15.1x 16.6x

Rev. ($mm) $127 $85 $106 $113Gross Margin 76% 71% 72% 71%R&D % of Sales 24% 31% 26% 26%E

BT Margin 23% 3% 15% 13%

Quarterly EPS Q1 Q2 Q3 Q42008A $0.13 $0.17 $0.13 $0.102009A $0.00 -$0.02 $0.01 $0.072010E $0.13a $0.08 $0.06 $0.06 Dividend $0.14 Yield 2.2%Book Value $4.34 Price/Book 1.5x

Shares O/S (mm) 35.4 Mkt. Cap ($mm) $237Float O/S (mm) 35.1 Float Cap ($mm) $234Wkly Vol (000s) 303 Wkly $ Vol (mm) $1.4Net Debt ($mm) -$37.1 Next Rep. Date July (E

Notes: Share price, target price & cap. in C$, all other values in US$;Rev. & operating earnings presented on continuing operations basisMajor Shareholders: Douglas Barber (6.1%), Wally Pieczonka(4.7%)First Call Mean Estimates: GENNUM CORP (US$) 2010E: $0.38;2011E: $0.50

Changes Annual EPS Annual CFPS Quarterly EPS Target 2010E $0.22 to $0.32 2010E $0.29 to $0.43 Q2/10E $0.05 to $0.08 $4.40 to $4.80

2011E $0.23 to $0.28 2011E $0.35 to $0.39 Q3/10E $0.05 to $0.06 Q4/10E $0.05 to $0.06


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Important DisclosuresAnalyst's CertificationAs to each company covered in this report, the analyst hereby certifies that the views expressed in this report accurately reflect my personal views aboutthe subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specificrecommendations or views expressed in this report.Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and theiraffiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generatingnew ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Ltd. are not registered as research analysts with FINRA. These analystsmay not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific DisclosuresFor Important Disclosures on the stocks discussed in this report, please go http://researchglobal.bmocapitalmarkets.com/Company_Disclosure_Public.asp.

Distribution of Ratings (Dec. 31, 2009)Rating

Category BMO RatingBMOCM US

Universe*BMOCM USIB Clients**

BMOCM USIB Clients***

BMOCMUniverse****

BMOCMIB Clients*****

First CallUniverse

Buy Outperform 32.2% 12.3% 38.3% 36.1% 47.9% 50%Hold Market Perform 62.6% 10.2% 61.7% 56.9% 48.9% 43%Sell Underperform 5.3% 0% 0% 6.9% 3.2% 7%

* Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as

percentage within ratings category.*** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking

services as percentage of Investment Banking clients.**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as

percentage of Investment Banking clients.

Ratings and Sector KeyWe use the following ratings system definitions:OP = Outperform - Forecast to outperform the market;Mkt = Market Perform - Forecast to perform roughly in line with the market;Und = Underperform - Forecast to underperform the market;(S) = speculative investment;NR = No rating at this time;R = Restricted Dissemination of research is currently restricted.

Market performance is measured by a benchmark index such as the S&P/TSX Composite Index, S&P 500, Nasdaq Composite, as appropriate for eachcompany. BMO Capital Markets eight Top 15 lists guide investors to our best ideas according to different objectives (Canadian large, small, growth,value, income, quantitative; and US large, US small) have replaced the Top Pick rating.

Other Important DisclosuresFor Other Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Company_Disclosure_Public.asp or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO CapitalMarkets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.

Prior BMO Capital Markets Ratings Systemshttp://researchglobal.bmocapitalmarkets.com/documents/2009/prior_rating_systems.pdf

Dissemination of ResearchOur research publications are available via our web site http://bmocapitalmarkets.com/research/. Institutional clients may also receive our research viaFIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely

available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regularmail. Please contact your investment advisor or institutional salesperson for more information.

Conflict StatementA general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managingconflicts of interest in connection with investment research which is available at http://researchglobal.bmocapitalmarkets.com/Conflict_Statement_Public.asp.

General DisclaimerBMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and itssubsidiaries BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Lte./Ltd., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in theU.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO


12/12

BMO Capital Markets

Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. Theopinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to changewithout notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliableand contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express orimplied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arisingfrom any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected inthis report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual clientobjectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposesonly and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customersthe securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a longor short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Thereader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluatingwhether or not to buy or sell securities of issuers discussed herein.

Additional Matters

To Canadian Residents: BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Ltee/Ltd., affiliates of BMO Capital Markets Corp., furnish this report toCanadian residents and accept responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effecttransactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. and/or BMO Nesbitt Burns Ltee/Ltd.

To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residentsand accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effecttransactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd.

To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the FinancialServices Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional

experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevantpersons). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.

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served through Harris N.A. Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets.BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, Harris N.A. and BMOIreland Plc, and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC), BMO Nesbitt Burns Trading Corp. and BMOCapital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member CIPF) in Canada, Europe and Asia, BMO Nesbitt Burns SecuritiesLimited (U.S. registered and member of FINRA), and BMO Nesbitt Burns Lte/Ltd. (Member CIPF) in Canada, and BMO Capital Markets Limited in Europeand Australia. Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is atrademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.

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