RY 172.93 -0.271% SHOP 157.86 0.7274% TD 75.22 0.2532% ENB 59.74 0.5216% BN 81.36 0.9429% TRI 234.42 0.5404% CNQ 43.01 1.2% CP 104.55 0.7225% CNR 146.44 0.7568% BMO 139.17 0.2377% BNS 77.04 -0.0649% CSU 4487.8101 0.7917% CM 91.94 -0.6054% MFC 44.04 1.1716% ATD 80.33 -0.5694% NGT 54.77 -0.635% TRP 66.14 0.532% SU 50.335 1.4819% WCN 245.2 -2.104% L 191.84 0.64%
Allied Properties Real Estate Investment Trust (TSX: AP.UN) is a leading owner, manager, and developer of distinctive urban workspace in Canada’s major cities and network-dense urban data centres in Toronto that form Canada’s hub for global connectivity. Allied’s business is providing knowledge-based organizations with distinctive urban environments for creativity and connectivity.
Investment Rationale
Dividend History. Source: Refinitiv (Thomson Reuters)
Insiders Activity. Source: Refinitiv (Thomson Reuters)
Source: Refinitiv (Thomson Reuters)
Financial Highlights: Q3FY20
Source: Company Filing
Outlook
The company’s original internal forecast for 2020 called for mid-single-digit percentage growth in each of same-asset NOI, FFO per unit and AFFO per unit. In light of Allied’s second and third quarter results, recent private placement of units and outlook for the fourth quarter, Allied has revised its internal forecast for 2020 to flat-to-low-single-digit percentage growth in each of same-asset NOI, FFO per unit and AFFO per unit. While Allied does not forecast NAV per unit growth, it continues to expect growth over the course of 2020. Also, Allied continues to have deep confidence in, and commitment to, its strategy of consolidating and intensifying distinctive urban workspace and network-dense UDCs in Canada’s major cities. Allied firmly believes that its strategy is underpinned by the most important secular trends in Canadian and global real estate.
Top-10 Shareholders
The top 10 shareholders have been highlighted in the table, which together forms around 24.23% of the total shareholding. BMO Asset Management Inc. and CI Investments Inc. holds the maximum interests in the company at 4.08% and 3.86%, respectively. The institutional ownership in the stock stood at 43.7%, and ownership of the strategic entities stood at 1.41%, respectively.
Source: Refinitiv (Thomson Reuters)
Valuation Methodology (Illustrative): EV to Sales based Valuation Metric
Note: All forecasted figures and peers have been taken from Thomson Reuters
Peer Comparison
Source: Refinitiv (Thomson Reuters)
Stock Recommendation: Real Estate sector was among those badly jolted because of COVID-19 pandemic. However, with a gradual recovery in the broader economy, the sector is also reviving from a downturn. The company’s revenue recovered approximately 2.3% on a sequential-quarter basis to 139.7 million. Gross profit improved by 2.2% and operating income increased by 3.7% in the same period.
Moreover, Allied’s results in the third quarter were stronger than the second quarter. Gross monthly rent due in the quarter was CAD 168 million, up 2.4% from CAD 164 million in the second quarter, with rent collection at 95.2%, up from 94.5% in the second quarter. Same-asset NOI from the rental portfolio in the third quarter was CAD 72.2 million, up 2.9% from 70.2 million in the second quarter. Also, the company’s total asset has surged with a CAGR of 28.9% since IPO to September 31, 2020. In the third quarter, the company's total assets improved to CAD 9.3 billion against CAD 9.15 billion in the second quarter of 2020. Further, the management expects even stronger results in the fourth quarter with rental revenue returning to more normal levels.
Moreover, the group has a decent track record of dividend distribution and offering a lucrative dividend yield amid a low-interest rate environment.
Therefore, based on the above rationale and valuation, we recommend a “Buy” rating at the closing price of CAD 37.73 on January 25, 2021.
Technical Price Chart (as on January 25th, 2021). Source: Refinitiv (Thomson Reuters)
*Recommendation is valid at January 26, 2021 price as well.
Disclaimer
The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.