Stocks’ Details

Fairfax Financial Holdings Limited

Fairfax Financial Holdings Limited (TO: FFH) is involved in property and casualty (P&C) insurance and reinsurance along with the associated investment management. Recently, the company has announced that its president, Paul Rivett is retiring after spending 17 years with the company. However, he’ll continue to be in the board of some of its investees such as Recipe Unlimited and Fairfax Africa. 

Q4FY19 Financial Highlights for the Period ended 31 December 2019: FFH announced its quarterly results, wherein the company reported a total operating income of US$250.7 million, as compared to US$231.3 million reported in the year-ago period. The company reported net earnings of US$672 million, as compared to a loss of US$477.6 million in the previous corresponding period. The strong bottom line is driven by a substantial net gain on investments. During the quarter, gross written premiums grew ~12.5% on an annual basis to US$ 4.3 billion.

4QFY19 Highlights (Source: Company Reports)

FY 2019 highlights: The company recorded net earnings of US$ 2 billion, primarily driven by investment gains. The combined ratio stood at 96.9% against 97.3% recorded in the previous year on account of lower catastrophe losses during the period. At the end of the year, the company’s cash balances stood at US$ 1.1 billion. The company's total debt to total capital ratio decreased to 24.5% from 25.0% recorded in the previous year.

Valuation Methodology: P/B Multiple Approach

P/B Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock is quoting at CAD626.93 with a market capitalization of ~$16.8 billion. Currently, the stock is inching towards its 52 weeks high of CAD 667.23. The company had reported a decent result recently, which gives the momentum to the share price. We have valued the stock using relative valuation method, i.e., P/B based approach. For this, we have taken peers like Hartford Financial Services Group Inc (NYSE: HIG), American International Group Inc (NYSE: AIG), to name few and arrived at a target price with lower double-digit upside (in percentage terms). Hence, we give a “Buy” recommendation on the stock at the current market price of CAD626.93, up ~0.3% as on 19 February 2020.

 Price Chart (Source: Thomson Reuters)

Canadian Apartment Properties Real Estate Investment Trust

CAPREIT Wraps Purchase of 8 Properties:  Canadian Apartment Properties Real Estate Investment Trust (TO.CAR.UN) is a top real estate investment trusts in Canada, which manages more than 65,000 residential rental apartments and townhouse suites. On 10 February 2020, the company stated that it had completed the earlier announced buying of a portfolio of 8 properties. The portfolio consisted of 14 apartment buildings, which totalled 1,503 rental suites in Halifax, Nova Scotia.

Q3FY19 Financial Highlights for the Period ended 30 September 2019: CAR.UN announced its quarterly results, wherein the company reported operating revenue of $198.8 million, as compared to $172.3 million reported in the year-ago period. The company reported a net operating income of $132.8 million, as compared to $114.2 million in the previous corresponding period. During the quarter, the company reported Funds from Operations of $0.554 per unit, as compared to $0.535 per unit recorded in the year-ago period. Normalized Funds From Operations pay-out ratio came in at 62%, during the quarter.

3Q19 Financial Highlights (Source: Company Reports)

Cash Flow Details: As of September 30, 2019, the company had investment properties of $12.2 billion. Cash flow from operating activities came in at $120.9 million. Total debt to gross book value at the end of the period came in at 36.74%.

Outlook: The company expects that the multi-unit residential rental business will witness growth in most of the markets in which the company operates. Consequently, the company anticipates sustainable annual increases in same-property Net AMR while stabilizing average occupancies in the ambit of 97% to 99%, annually. 

Valuation Methodology: P/E Multiple Approach

P/E Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock is quoting at $59.44 with a market capitalization of ~$10.07 billion. Currently, the stock is trading close to its 52-week high of $59.96. We have valued the stock using relative valuation method, i.e., P/E based approach. For this, we have taken peers like Allied Properties Real Estate Investment Trust (TO: AP.U), Boardwalk Real Estate Investment Trust (TO: BEI.U), to name few, and arrived at a target price with lower sing-digit upside (in percentage terms). Hence, we have a “watch” stance on the stock at the current market price of $59.44, down ~0.5% as on 19 February 2020.

 Price Chart (Source: Thomson Reuters)

Real Matters Inc.

Director appointment: Real Matters Inc. (TO. REAL) provides a platform which merges network management resources and proprietary technology with several of independent qualified Field Agents for lending and insurance industry services. On 7 February 2020, the company announced that all the candidates listed in Real Matters’ management information circular, were nominated as directors of Real Matters.

Other Recent Updates: On 4^th February 2020, the company announced that the Toronto Stock Exchange (“TSX”) has permitted an alteration to the Company’s current Normal Course Issuer Bid (“NCIB”) to increase the maximum aggregate purchase price of shares to US$46 million (being roughly C$60 million) purchased under the NCIB from US$20 million (being around C$27 million).

Q1FY20 Financial Highlights for the Period ended 31 December 2019: The company announced its quarterly results, wherein the company reported total revenue of US$103.8 million, as compared to US$60.5 million reported in the year-ago period. The company reported consolidated adjusted EBITDA of US$14.5 million, as compared to US$1.7 million in the previous corresponding period. During the quarter, the adjusted net income per share stood at 10 cents per share as compared to 2 cents per share reported in the year-ago quarter. Revenues from U.S. Appraisal and U.S. Title came in at US$67.4 million and US$28.7 million, respectively.

1QFY20 Financial Highlights (Source: Company Reports)

Cash Flow Details: As of December 31, 2019, the company had a cash balance of US$80.9 million, up from the previous quarter figure of US$71.7 million. During the first quarter, the company repurchased 0.6 million shares worth US$5.9 million.

Valuation Methodology: P/E Multiple Approach

P/E Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock is quoting at $15.68 with a market capitalization of ~$1.3 billion. Currently, the stock is trading close to its 52-week high of $16.15. The company remains positive on the higher U.S. Appraisal from clients, which led better-than-expected market share gains in the first quarter. New client additions remain a key positive. We have valued the stock using relative valuation method, i.e., P/E based approach. For this, we have taken peers like Kinaxis Inc (TO: KXS.TO), Open Text Corp (OTEX.OQ) to name few and arrived at a target price with mid-single-digit upside (in percentage terms). Hence, we have a "watch" stance on the stock at the current market price of $15.68, down ~0.9% as on 19 February 2020.

Price Chart (Source: Thomson Reuters)