BTB Real Estate Investment Trust

BTB Real Estate Investment Trust (TSX: BTB.UN) is a Canada-based unincorporated, open-ended real estate trust, which owns approximately 65 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.

Key highlights 

• Acquired industrial property: Recently, the trust announced the acquisition of an industrial property located at Québec for the price of CAD 15.25 million with a total leasable area of 99,000 sq. ft. The property is entirely leased to Kore Outdoor Inc., a global leader in the manufacturing of high-quality paintball products. The property will start generating revenue during the next quarter, which is a key positive.
• Elevated NOI Margin:The REIT’s NOI margin stands at 59.8% compared to 53.8% for the same period last year. The company has recorded additional recoveries of CAD 1.4 million and if these recoveries are excluded, still the NOI margin would be 57.5%, representing a 3.7% increase compared to the previous corresponding period, which is appreciable.
• Healthy leasing activity along with higher average renewal rate: Lease renewal activity for the REIT was strong throughout the quarter, with an 86.2% renewal rate, up 10.2% from the previous quarter. Leases of 97,193 square feet were renewed, with 82,826 for leases expiring in 2021 and 14,367 for leases expiring in 2022 in subsequent years. The leasing activity was picked up in the quarter, with 78,294 square feet leased to new tenants. On the H1 basis the trust also registered a 3.2% rise in average rent renewal rates, which is commendable.
• An income play: The trust has reported a stable dividend payment over the years, aided by consistent cash flows. Recently, it announced a monthly cash distribution of CAD 0.025 per unit for August 2021, representing CAD 0.30 per unit on an annualized basis. Moreover, at the last closing price, the stock was offering a dividend yield of ~7.3%, which is lucrative considering the current interest rate scenario.

• Industry beating margins: The management’s solid determination helped the group in leaping the industry median margins on many fronts in Q2 2021, which exhibits the competitive advantage of the REIT within the industry. The chart below gives a glimpse of this.

Financial overview of Q2 2021 (In thousands of CAD dollars) 

Source: Company 

• In Q2 2021, the trust posted rental revenue of CAD 26.0 million against CAD 23.0 million in the previous corresponding period.
• On the back of marginally decline in total operating expenses at CAD 10.4 million v/s CAD 10.6 million in Q2 2020, the trust reported higher operating income of CAD 15.5 million, against CAD 12.4 million in the previous corresponding period.
• Net income stood at CAD 7.1 million, against a net loss of CAD 1.1 million in pcp.
  

Risks associated with investment

The Company's revenue and operating results depend significantly on the occupancy levels and rent collection; hence, fluctuations in occupancy levels and business volumes would affect the group’s revenue and cash flows.

Valuation Methodology (Illustrative): EV to EBITDA 

Stock recommendation

The trust maintained its stability in Q2 2021, thanks to portfolio diversification, excellent rent collection rates, and active lease renewal and leasing activities. The occupancy rate stood at 92.2%, a 1.2% increase compared to the prior quarter. The REIT's ability to adapt and embrace change has been a critical factor in its long-term viability over the last year, and we believe it is now ready to embrace the changes and opportunities that have been made available to them, and it is confidently approaching the third quarter. Furthermore, the stock offers a dividend yield of more than 7%, which is lucrative for long-term investors considering the current environment. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 4.09 on September 10, 2021. We have Boardwalk REIT, PRO REIT, Slate Office REIT, etc., as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on September 10, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Mandalay Resources Corp.

Mandalay Resources Corp. (TSX: MND) is a Canada-based natural resource Corporation with producing assets in Australia and Sweden, and care and maintenance and development projects in Chile and Canada.

Key highlights 

• Solid Quarterly Performance: The company's financial performance during the second quarter of 2021 was excellent. The firm achieved USD 51.4 million in consolidated sales and USD 23.1 million in adjusted EBITDA, resulting in an EBITDA margin of 45% and adjusted net income of USD 11.5 million. Additionally, this was the company's sixth consecutive profitable quarter.

Source: Company 

• Generating Strong Free Cash Flow: The firm earned USD 12.7 million in free cash flow in the second quarter and completed the quarter with a cash balance of USD 39.1 million. The increasing strength of the company's balance sheet considerably increases its ability to fund near-term growth prospects as it continues to produce high free cash flow. In addition, the firm returned USD 3.8 million towards the Syndicated Facility during the quarter, leaving USD 51.4 million outstanding.

Source: Company 

• Positive Outlook: Costerfield and Björkdal are expected to continue improving output and costs in 2021, according to the firm as it ramps up production from the high-grade Youle vein. In 2021, the higher-quality Aurora zone and adjacent veins are expected to enhance output, allowing for a higher feed grade to be processed. The firm presently expects excellent operational results to continue; but, the COVID-19 epidemic, as seen across the mining sector, presents uncertainty.
  

Financial overview of Q2 2021 (Expressed in U.S. dollars)

Source: Company 

• In Q2 2021, the company posted higher revenue at USD 51.3 million compared to USD 42.3 million in the previous corresponding period. The increase in revenue was the result of a 13% increase in gold equivalent ounces sold and the support from higher realized metal prices.
• Income from the operations registered a slight improvement to USD 24.2 million against USD 22.6 million in pcp.
• Adjusted EBITDA stood at USD 23.1 million compared to USD 21.2 million in Q2 2020.
• The firm lowered it finance cost to USD 1.8 million against USD 2.9 million in pcp.
• The company reported consolidated net income of USD 4.7 million against a loss of USD 2.4 million in pcp.

Risks associated with investment

The company’s business model is exposed to a variety of risks ranging from a sharp plunge in the underlying commodity prices, forex risks etc. The resurgence of COVID-19 cases could disrupt exploration and production, which would affect financial performance. 

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The company delivered strong financial results for the second quarter of 2021 and continues to execute its operational strategy to attain the 2021 production and cost guidance. Additionally, it generated USD 12.7 million in free cash flow and ended the quarter with a cash balance of USD 39.1 million, which is a key positive. Therefore, based on the above rationales and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 2.44 on September 10, 2021. We have considered Karora Resources Inc, Victoria Gold Corp, Great Panther Mining Ltd, etc. as the comparison's peer group.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on September 10, 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.