Artis Real Estate Investment Trust (TSX: AX.Un) is a Canada based closed-end REIT company, which operates through properties located in Central and Western Canada and select markets throughout the United States, Alberta, British Columbia, Manitoba, Ontario, Saskatchewan, Arizona, Minnesota, Colorado, New York, and Wisconsin. 

Why Should Investor’s Book profit?

• Decline in occupancy: During Q3FY21, the company reported its occupancy of 90.8%, as compared to 91.8% in Q2FY21. A lower occupancy rate indicates weak operational performance and remains a key concern for the group.

• Falling FFO per unit: In Q3FY21 and 9MFY21, the company reported its FFO per unit of CAD 0.33 and CAD 1.02, respectively, which is lower than 0.37 and 1.06 in pcp. The above was primarily due to lower net operating income in respective periods.

• Poor liquidity: At the end of Q3FY21, the company reported poor liquidity of 0.40x and 0.48x, respectively, as compared to the industry median of 1.17x and 0.87x, respectively. The above indicates that the company struggling to manage its current liabilities through short-term assets.

• Weak debt-protection metrics: The company reported its net debt to EBITDA of 36.78x, as compared to the industry median of 24.49x. A higher ratio from the industry suggests a poor debt protection ability of the firm.

Valuation Methodology (Illustrative): EV to Sales based

Stock Recommendation:

The stock of AX.Un closed below its 50-days and 100-days simple moving average (SMA), indicating a near term weakness. We have valued the stock by using the EV to Sales based relative valuation approach and arrived at a target price offering lower double-digit downside potential (in % terms). We have considered peers like Cominar Real Estate Investment Trust, Plaza Retail REIT etc. Hence considering the aforesaid facts, we recommend a ‘Sell’ rating on the stock of AX.UN at the closing price of CAD 11.03 on December 14, 2021.

One-Year Technical Price Chart (as on December 14, 2021). Analysis by Kalkine Group

*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.