InterRent Real Estate Investment Trust

InterRent Real Estate Investment Trust (TSX: IIP.Un) is engaged in real estate investment trust and operates through the acquisition and ownership of multi-residential properties.

Key Updates:

• Constant rise in total debt: In the recent quarters, the company reported a constant surge in total debt, which remains as a key concern as it hinders the overall financial flexibility of the firm. Moreover, a higher debt component leads to higher interest costs. Notably, at the end of Q3FY21, the group reported its total debt of CAD 1,371.4 million, which is the highest in the last five quarters.

• Poor debt-protection metrics: At the end of Q3FY21, the group reported its net debt to EBITDA of 48.34x, higher than the industry median of 24.28x. A higher net debt to EBITDA ratio indicates a weak debt protection ability of the firm.
  

• Technical showing a possible price correction: The IIP.UN stock closed below its crucial resistance level of CAD 17.98 and also broke its short-term trend, indicating a possible correction from the current level. Moreover, the stock closed below its 20-days simple moving average (SMA) indicating a bearish signal.

• Decline in net operating income margin: At the end of Q3FY21, the group reported a slide in its net operating margin (NOI), which indicates a lower operational efficiency, and continuation of the above trend remains a key concern. Notably, in Q3FY21, the company reported its NOI at 64.5%, lower than 66% in pcp.

Technical Price Chart (as on November 11, 2021). Source: REFINITIV, Analysis by Kalkine Group

Valuation Methodology (Illustrative): Price to Earnings-based

Stock Recommendation:

At the end of Q3FY21, the company reported lower cash from operations of CAD 8.918 million, as compared to CAD 18.301 million in pcp. Moreover, the company is also struggling with higher input cost, and posted total operating expenses of CAD 16.616 million in Q3FY21, higher than CAD 13.491 million in pcp. Notably, administrative costs also surged CAD 3.012 million during the quarter, as compared to CAD 2.258 million in pcp. Continuation of the above trend is likely to weigh high on the margins and profitability. We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a target downside of double-digit (in percentage terms). For the said purposes, we have considered peers like Boardwalk Real Estate Investment Trust, European Residential REIT and Canadian Apartment Properties Real Estate Investment Trust. Hence, we recommend a ‘SELL’ rating on the stock of IIP.UN at the last traded price of CAD 17.69 on November 11, 2021.

One-Year Technical Price Chart (as on November 11, 2021). Analysis by Kalkine Group

Fiera Capital Corp

Fiera Capital Corp (TSX: FSZ) is a Canada-based independent, full-service, multi-product investment company which provides investment advisory and related services to institutional investors, private wealth clients and retail investors. The company operates through its investment management services segment in Canada and the United States.

Why Should Investors Book Profit?

• Growing risk of broader market correction: The resurgence in Delta variant cases and lastly Bank of Canada terminated its “QE program” and said rate hikes are likely to happen by mid-2022, both these factors are generating a lot of uncertainties. It might cause a volatility in the equity market, as a result the company might witness lower AUM and deposits which could further impact its operations and cash flows.
• Falling net income: Despite clocking healthy growth in revenue in Q3 2021, the company was unable to beat the last corresponding period’s net income, which fell to CAD 3.1 million, compared to CAD 13.7 million in pcp. This exhibits the pressure on company.
• Clocked higher operating expenses: With higher expenses under sales and admin, as well as other expenses, the company's consolidated operational expenses grew to CAD 171.7 million, up CAD 18.1 million or 11.8% from CAD 153.6 million in Q3 2020.

Valuation Methodology (Illustrative): Price to Book Value Valuation Metrics

Stock recommendation

Group’s posted decent performance in Q3 2021 revenue, which was supported improving economic activity. however, despite good revenue growth, the company was unable to beat the previous similar period's net income, indicating that the company is under pressure. In addition, the company's operating expenses have increased, eroding its profit margin. Recently, the Bank of Canada terminated its “QE program” and said rate hikes are likely to happen by mid-2022. This issue is anticipated to have an impact on the broader equities market. Therefore, based on the rationales discussed above and valuation, we recommend a "Sell" rating on the stock at the closing price of CAD 11.00 on November 11, 2021.  

*The reference data in this report has been partly sourced from REFINITIV.

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.