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Allied Properties Real Estate Investment Trust (TSX: AP. UN) is a closed-end real estate investment trust (REIT), which is engaged in the development, management, and ownership of primarily urban office environments across Canada's major cities. Most of the total square footage in the company's real estate portfolio is in Toronto and Montreal. The company also controls several telecommunications/IT and retail properties within its real estate portfolio.
Key Highlights
Financial overview of Q1 2022
Top-5 Shareholders
The company’s top 5 shareholders hold around 22.10% of the total shareholding, where RBC Global Asset Management Inc. is the biggest shareholder, who owns 6.92% of total outstanding shares. Additionally, the company's institutional ownership stood at 47.30%. Higher institutional holding boosts the confidence in the mind of retail investors.
Valuation Methodology (Illustrative): EV to Sales based Valuation Metrics
Risks associated with investment
The REIT's revenue and operating results depend significantly on the occupancy levels and rent collection; hence, the group is subject to general business risks. These risks include government regulation, fluctuations in occupancy levels and business volumes, competition from other players, and general economic conditions.
Stock recommendation
The business reported improvement in same-asset NOI, FFO per unit, and AFFO per unit in Q1 2022 compared to Q1 2021, despite a 2.8 percent subdued growth in rental revenue. Furthermore, the business anticipates a low-to-mid-single-digit percentage improvement in each KPI for 2022. The REIT has a robust development pipeline and has preleased about 65 percent of the available space. According to the management, current developments will improve its annual EBITDA by roughly CAD 82 million. We believe that this would not only raise its profitability but will also significantly reduce its net debt to annualized EBITDA ratio and dramatically increase its interest coverage ratio, both of which would be big positives.
The trust is maintaining a highly diversified portfolio which helps them in deriving healthy NOI and has proved its creditworthiness as it is sequentially delivering spirited performance across its operating margin matrix. We believe the momentum to continue in the foreseeable future, as the Company has an extensive development pipeline to support future growth.
Therefore, based on the above rationales and valuation, we recommend a "Buy" rating on the stock at the last closing price of CAD 38.85 as on May 30, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
One-Year Technical Price Chart (as on May 30, 2022). Source: REFINITIV, Analysis by Kalkine Group
*Recommendation is valid on May 31, 2022, price as well.
Technical Analysis Summary
Disclaimer
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