Facedrive Inc

Facedrive Inc (TSXV: FD) is a multi-faceted company that operates in the technology sector. The company is fulfilling its mandate through a number of verticals that either leverage its existing technologies or project synergies with existing lines of business through its five verticals, including “Facedrive Rideshare”, its rideshare business, sustainable e-commerce platform “Facedrive Marketplace”, food-delivery service “Facedrive Foods”, e-social platform “Facedrive Social” and its contact-tracing and sustainable health services business under “Facedrive Health”.

Key Highlights 

• Food delivery vertical showing substance:Recently, the company announced that its food delivery vertical “Facedrive Foods” is experiencing substantial growth, wherein total orders exceeded 4,500 meal deliveries per day. The company partnered with approximately 4,650 restaurants with over 260,000 active users registered on a platform across 19 cities in Canada.

• The growing number of users and drivers:The Company managed to grow the number of drivers and users during 2020. The number of registered Facedrive Rideshare drivers in Canada increased from 10,376 as of December 31, 2019, to 18,964 as of December 31, 2020. The number of Rideshare users grew from 34,031 as of December 31, 2019, to 64,224 as of December 31, 2020.

• Getting investment from Ontario’s government:Recently, the company announced that TraceSCAN, the COVID-19 wearable contact-tracing solution developed by its Facedrive Health vertical, has been endorsed with an investment by the Ontario Ministry of Economic Development. It would be receiving CAD 2.5 million under this agreement.

• Changes in management: Recently, the Company appointed Susan Uthayakumar and Suman Pushparajah as new members on the Board. Concurrent with these appointments to the Board, Mr. Jay Wilgar resigned from the Board.

Financial overview of Q3 2020 (In Canadian dollars)

Source: Company 

• The company announced its quarterly results, wherein it posted a higher revenue of CAD 0.266 million, compared to CAD 0.195 million in the previous corresponding period (pcp).

• Total Operating expenses stood at CAD 3.85 million, as compared to CAD 1.34 million in pcp.

• The company reported an operating loss of CAD 3.58 million, higher than a loss of CAD 1.151 million in the previous corresponding period, due to a higher operating expense.

• The company’s net loss stood at CAD 3.524 million, slightly below CAD 3.527 million in pcp, due to the inclusion of listing expense of CAD 2.376 million in Q3FY19.

• Cash and cash equivalent stood at CAD 7.36 million, while total assets were at CAD 27.765 million. 

Risks associated with investment

The Company’s operating expenses have increased in the recent past, which is a reason for concern for the company. The solutions which are provided by the company can be replaced by other information technology firms, and hence might lead to price competition. 

Stock recommendation

The TraceSCAN solution's idea is promising, and proper implementation of the project would bring strong business prospects for the company. As per the Company, other applications like Facedrive Food, Facedrive Health and Facedrive Marketplace would generate revenues in the coming quarters, which is a key positive. The company is already witnessing growth from its food delivery vertical and rideshare vertical, where the number of orders executed, and the number of users and drivers are increasing respectively.

Hence, considering the aforesaid facts and industry prospects, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 18.48 on April 9, 2021.

One-year Price Chart (as on April 09, 2021). Source: Refinitiv (Thomson Reuters)

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 63 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 

• 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 March 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 7.35%, which is lucrative considering the current interest rate scenario. This would attract several investors looking for a consistent income stream.

Source: Refinitiv (Thomson Reuters) 

• Rent collections remain Strong:Despite the challenges faced by the evolving events attributable to the pandemic, the Trust collected 100% of its fourth-quarter invoiced rents, in line with its collection record through March to December 2020. Rent collection remained strong. Also, the Trust is reporting a significant reduction of the balance of receivables. 

• Healthy occupancy rates:The group reported an impressive occupancy rate of 95.8% in Q4FY20 in the industrial segment (v/s 93.9% in Q3FY20). The office segment also reported a slight improvement in occupancy, which is commendable considering the current operating environment. On a consolidated basis, the occupancy rate stood at 92.2%, a 0.1% increase compared to the prior quarter. The only laggard was a decrease of 2.7% in the occupancy rate of the retail sector.

Source: Company 

• Rising average renewal rate:The trust witnessed an increase of 16.6%, compared to a 4.3% increase in 2019 in its average rental rate of expired and renewed leases during Q4 2020. A rise of 20.5% in the office segment and 12.9% in the industrial segment is noteworthy. For FY2020, the average rental rate increased by 6.8%, compared to 5.5% in 2019.

Source: Company 

Financial overview of FY2020 (In thousands of CAD dollars)

Source: Company 

• For FY 2020, the trust posted rental revenue of CAD 92.9 million, against CAD 93.6 million in the previous corresponding period.
• On the back of marginal decline in total operating expenses at CAD 41.7 million v/s CAD 42.7 million in FY2019, the trust reported higher operating income of CAD 51.2 million, against CAD 50.8 million in the previous corresponding period.
• Net income declined to CAD 2.9 million, against CAD 51.8 million in pcp. Higher financial expenses and net change in fair value of investment properties were the sole reasons behind lower net income. 

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, competition from other players, and general economic conditions may affect the overall performance. 

Valuation Methodology (Illustrative): EV to EBITDA

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The trust collected 100% of its fourth-quarter invoiced rents, which was in line with the collection record from March to December 2020. The trust also reported a significant reduction of receivables' balance to a normalized level of CAD 5.2 million compared to CAD 8.6 million for the second quarter, which is positive. The occupancy rate remained stable, along with an increase in average renewal rate, primarily from office and industrial segments, reflects on improving macros. Furthermore, the stock offers a dividend yield of 7.35%, 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 at the closing price of CAD 4.08 as on April 9, 2021. We have Boardwalk REIT, Inovalis REIT, PRO REIT as the peer group for the comparison.

BTB.UN one year technical chart (as on April 9, 2021). Source: Refinitiv (Thomson Reuters)

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.