BTB Real Estate Investment Trust (TSX: BTB.UN) is a Canada-based unincorporated, open-ended real estate trust, which owns approximately 64 commercial, office and industrial properties in primary and secondary markets. It operates through four segments: office, commercial, industrial, and general-purpose, with properties in Quebec and eastern Ontario.

Why Should Investors Book Profit?

• Increasing uncertainties: The resurgence of Delta variant cases along Omicron has raised a lot of questions, and it might have an influence on the company's operations and cash flows as the government may tighten some mandatory lockdowns to combat the spread.
• Performance degraded on sequential basis: On the sequential basis the company’s key performance indicators dipped down, which is not a healthy indicator. Its rental revenue stood at CAD 23.9 million against CAD 26.0 million in Q2 2021, whereas its adjusted net income also fell to CAD 6.0 million compared to CAD 8.0 million respectively.
• Heavily leveraged: The company’s debt to equity ratio at the end of September 30, 2021, stood at 1.42x, which was higher than the industry median of 0.90x. Additionally, its Net Debt to EBITDA stood at 38.72x against the industry median of 24.60x. These factors imply higher balance sheet risks.

Valuation Methodology (Illustrative): EV to EBITDA Based

Analysis by Kalkine Group

Stock recommendation

The Company's revenue and operating results depend significantly on the occupancy levels and rent collection; hence, it is subject to general business risks. Furthermore, the resurgence of the delta variant and omicron is wreaking havoc and could impact the volume of the business, which would dent the company’s KPI’s. The company also witnessed the lower KPI’s in its recent financial numbers, compared on the sequential basis. Even the greater debt profile implies that the balance sheet is under stress. Therefore, based on the above rationale and valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 4.05 on January 04, 2022.

One-Year Technical Price Chart (as on January 4, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

Disclaimer

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