On Wednesday, Scotiabank (TSX:BNS) resumed coverage on Rogers (NYSE:ROG) Sugar Inc. (RSI:CN) (OTC: RSGUF), issuing a Sector Perform rating with a price target of Cdn$6.25. The bank highlighted Rogers Sugar's improved EBITDA growth and the potential benefits from increased production. However, the analyst identified two primary risks that could affect the company's stock performance.
The first concern is the uncertainty regarding the final costs of Rogers Sugar's expansion project. Initially estimated at Cdn$160 million, the project's expenses could rise to Cdn$230 million, with the most recent update indicating a cost of Cdn$200 million. The final figure is expected to be clearer after the fourth quarter of fiscal year 2024.
The second risk involves potential tariffs on products exported to the U.S. Although these tariffs may not be implemented, the possibility of such trade barriers has created uncertainty, particularly in light of recent social media activity by President-elect Trump, which has added to the ambiguity and may discourage some investors.
Despite these risks, the analyst noted that under 10 times the price-to-earnings ratio (P/E), compared to approximately 10.7 times currently, could be attractive for some investors. The bank also acknowledged Rogers Sugar as a well-managed company that enjoys a duopoly in its market and offers a significant income yield of over 6%.
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