Sienna Senior Living Inc.

Sienna Senior Living Inc. (TSX: SIA) offers a full range of seniors’ living options, including independent living, assisted living, long-term care, and specialized programs and services.

Q2FY20 Financial Highlights: Sienna declared its quarterly results, wherein the company posted revenue of CAD 162.922 million, marginally lower from CAD 165.957 million in the previous corresponding period (pcp). During the second quarter, the business witnessed a lower occupancy rate, and the group reported a lower NOI of CAD 31.891 million as compared to CAD 39.929 million in Q2FY19. The period was marked by a higher operating expense of CAD 131.031 million as compared to CAD 126.028 million in pcp. The company’s Long-Term Care (LTC) – average occupancy, during the quarter stood at 92.6% against 98.3% in Q2FY19. Adjusted Funds from Operations came at CAD 16.623 million, significantly lower than CAD 24.428 million in pcp. The company generated a net loss of CAD 6.778 million in Q2FY20 as compared to a net profit of CAD 2.23 million in pcp, due to a higher expense related to the pandemic, combined with non-recurring restructuring costs, a lower occupancy rate and a fall in fair value adjustments on interest rate swap contracts. The negatives were partially offset by annual rental rate improvement from retirement, lower income taxes and mark-to-market adjustments on share- based compensation.

Q2FY20 Financial Highlights (Source: Company Reports)

Risks: Several factors like a risk on the mortgage, interest rate volatility etc. might impact the company’s overall performance. Further higher cost related to sanitization would result in a surge in total operating costs, which might hinder the overall margin of the company.

Valuation Methodology: EV to EBITDA Based (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of SIA plunged ~38% so far this year, due to a gloomy economic outlook on account of the ongoing pandemic. The business depends on the aged population of the country and is expected to remain resilient in the coming days, which is a key positive. Rent collection, for the month of August, stood at 99.6%, while occupancy remained stable at 81.1%. As per the recent announcement, the business is likely to receive additional funding for COVID-19 prevention and containment and the Government of British Columbia’s funding announcement to cover extra staffing costs dedicated to safe social visitations, which is likely to provide cushion to the margins. To ensure ample liquidity to support the working capital needs, the Company has increased its liquidity to CAD 240.5 million from CAD 144.0 million in December 2019, which is likely to help the group in navigating through the challenging time. Further, the Company continued to pay the dividend amid the challenging time, which shows the financial flexibility. At the last traded price, the stock was offering a dividend yield of ~8.2%, which is lucrative considering the current interest rate environment. We have valued the stock using the EV to EBITDA based relative valuation approach and arrived at a target price, which suggests a double-digit upside potential (in % terms). For the said purpose, we have considered peers like Chartwell Retirement Residences, Boardwalk Real Estate Investment Trust and Extendicare Inc etc. Hence, considering the aforesaid facts and current price movement, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 11.39 on September 28, 2020.

SIA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Corus Entertainment Inc. 

Corus Entertainment Inc. (TSX: CJR.B) is a leading media and content company based out of Canada. The company’s portfolio consists of premium brands such as Global Television, W Network, HGTV Canada, Food Network Canada, and HISTORY etc.

Key Highlights:

• Global expands its roster of new fall 2020 series as the network announced today the pickup of The Drew Barrymore Show. The above show is a one-hour daytime show and is hosted by award-winning Hollywood actress Drew Barrymore which and the show is produced and distributed by CBS Television.
• The Board of Directors announced quarterly dividend of CAD 0.06 per Class B Share and CAD 0.05875 per Class A Share, payable on September 30, 2020, 

Q3FY20 Financial Highlights: CJR.B announced its quarterly results, wherein the company posted revenue of CAD 348.967 million, declined 24% on y-o-y basis due to a significant decline from both the television and radio segments. The quarter was marked by significantly lower direct costs of sales, general and administrative expenses, while a higher depreciation and amortization, increased interest expense and higher other expense remained a drag. The company reported the inclusion of Broadcast license and goodwill impairment of CAD 786.79 million. Loss before income tax was recorded at CAD 757.227 million, as compared to a profit of CAD 103.813 million in the previous corresponding period (pcp). Net loss for the period stood at CAD 748.28 million, as compared to a net profit of CAD 73.645 million in Q3FY19. Free cash Flow, during the quarter, stood at CAD 90.8 million, as compared to CAD 90.1 million a year ago. 

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The impact of COVID-19 and measures to prevent its spread have affected the Company in a number of ways; Most significantly, advertising sales were materially impacted by business shut-downs as a result of quarantine measures implemented by provincial governments across Canada. Continuation of such trend would affect the group’s performance.

Stock Recommendation: The stock of CJR.B tumbled ~45% so far this year. The Company reported that the business had witnessed improved traction in the recent past, driven by an increased viewership across all the platforms, which is impressive. Notably, the company reported a resilient subscriber revenue, benefitting from the accelerated uptake of STACKTV. The recent pickup of The Drew Barrymore Show is likely to fuel the company’s viewership in the coming days. The Company has been working closely with its advertisers and agencies to create relevant and innovative marketing and advertising opportunities. With the business activity coming on track, we believe the advertising segment is likely to revive, which would lead to improved business prospects. Further, despite current challenging operating environment, the group did not reduce its dividend distribution, which is encouraging from an income investor’s point of view. At the last traded price, the stock was offering a dividend yield of 8.16%, which is lucrative considering the current interest rate environment. On the valuation front, the stock is trading at a significant discount compared to Industry (Media & Publishing) median. The stock is trading at a forward EV/EBITDA multiple of 4.1x compared to industry median of 7.7x.  Hence, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of CAD 2.94 on September 28, 2020.

CJR.B Daily Technical Chart (Source: Refinitiv, Thomson Reuters)‌

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