PRO Real Estate Investment Trust

PRO Real Estate Investment Trust (TSX: PRV.UN) is a Canada-based open-ended real estate investment trust (REIT), with four classifications of investment properties: Retail, Office, Commercial Mixed Use and Industrial.

Key highlights

• An Income Play: The group continues with a healthy track record of dividend payment.Recently, the company announced a monthly dividend of CAD 0.0375 per common share payable on March 15, 2021, with a record date of February 26, 2021. At the last traded price, the stock was offering a dividend yield of 7.28%, which is lucrative considering the current interest rate environment.

Source: Refinitiv (Thomson Reuters)

• Robust Rent collection: The group reported a rising rent collection trend from Oct 2020 to December 2020, indicating high-quality tenants coupled with solid operational fundamentals. In November 2020 and December 2020, the company reported 99.8% and 99.8% rent collection, respectively, which is impressive amidst the ongoing economic cycle.

Source: Company Filing

• Well-diversified and Strong Tenant Base: In Q3 2020, the occupancy rate remained stable at 98.1%, in line with the previous corresponding period. The company generates 86% of their total portfolio base rent from national and government tenants, while the top ten largest tenants accounted for approximately 36.7% of the base rent.

Source: Company

Financial overview of Q3 2020 (In Thousands of CAD)

Source: Company

• In Q3 2020, the company reported the Property revenue of CAD 17.3 million, an increase of CAD 4.1 million, or 30.7%, compared to CAD 13.2 million over the previous corresponding period, primarily due to incremental revenues from property acquisitions.
• Net operating income reported by the company in Q3 2020, stood at CAD 10.39 million, an increase by CAD 1.87 million as against CAD 8.52 million in the previous corresponding period, due to the favourable impact of property acquisition.

Source: Company

• The company reported a net loss of CAD0.7 million in Q3 2020, against a net profit of CAD6.9 million in Q3 2019, due to high-interest cost and loss on fair value adjustment under investment properties.

Risks associated with investment: The Company's revenue and operating results depend significantly on the occupancy levels and rent collection; any fluctuations in occupancy levels and business volume would affect.

Valuation Methodology (Illustrative): EV to EBITDA

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

Stock recommendation

The Company has reported impressive rent collection, showing improvement on a month-on-month basis. For December 2020, the company reported a rate of 99.8%, which is commendable. Along with this, the group has well-diversified and strong tenant base. In Q3 2020, the occupancy rate remained stable at 98.1% and the company is generating 86% of its total portfolio base rent from national and government tenants. Furthermore, the stock is offering a lucrative dividend yield amid a low interest rate environment. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 6.18 on February 24^th, 2021. We have considered Inovalis REIT, Plaza Retail REIT, True North Commercial REIT, etc. as the peer group for the comparison.

Source: Refinitiv (Thomson Reuters)

Glacier Media Inc.

Glacier Media Inc. (TSX: GVC) is a Canada based company, which offers information and marketing solutions. The company operates via three segments Environmental, Property and Financial Information, Commodity Information and Community Media. 

Key Highlights:

• Positive Technical Indicators: The stock of GVC is closed above the long-term support levels of 100-days, 150-days and 200-days simple moving average (SMA), indicating a bullish price trend. Moreover, in the recent past, the stock gained momentum and appreciated ~30% and ~28% in the last six months and nine months, respectively.

(Source: Refinitiv, Thomson Reuters)

• Improved Sequential Performance: The company reported higher revenue and gross profit of CAD 35.31 million and CAD 17.74 million in Q3FY20, compared to CAD 31 million and CAD 13.11 million in Q2FY20. Moreover, the group reported an operating income of CAD 3.19 million, improved significantly compared to an operating loss of CAD 7.19 million in Q2FY20.

• Strong Cashflow Generation: During Q3FY20 and 9MFY20, the company reported cash flow from operations of CAD 10.038 million and CAD 12.66 million, respectively, as compared to CAD 1.97 million and CAD 1.599 million, respectively, a year ago. The above growth denotes higher operational efficiency.

Q3FY20 Financial Highlights:

• GVC announced its quarterly results, wherein the company posted revenue of CAD 35.314 million, as compared to CAD 48.256 million in the previous corresponding period (pcp).
• Gross profit stood at CAD 8.577 million, stood significantly higher than CAD 2.089 million in the previous corresponding period. The increase was supported by significantly lower direct expense and a slightly lower general and administrative cost.
• Net interest expense stood lower at CAD 0.391 million, as compared to CAD 0.460 million in pcp, while depreciation and amortization expense stood at CAD 3.050 million, lower than CAD 3.516 million in Q3FY19.
• The group reported a net profit of CAD 2.476 million, as compared to a net loss of CAD 2.935 million in the previous corresponding period.
• Cash and cash equivalents stood at CAD 12.851 million, while total assets stood at CAD 255.828 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks Associated: The Company’s operations are exposed to a variety of risks, which includes risks relating to foreign exchange, credit, interest rate, and liquidity risk.

Stock Recommendation:

The group reported strong EBITDA growth and posted EBITDA of CAD 18.334 million compared to CAD 9.817 million, a year ago, while EBITDA margin improved to 11.7% from 5.3%, a year ago. The above improvement depicts strong operational efficiency, supported by cost-reduction initiatives taken during the period. The Community Media newspaper segment caters to more than two-million readers within the print-media segment and has a presence across more than 60 local markets, including B.C., Alberta, Saskatchewan, and Manitoba. Also, the company sells its products and services to a diversified customer base and offers several payment terms and therefore is exposed to credit risks from its trade receivables from customers. On the valuation front, the stock of GVC is available at a significantly lower valuation of EV to Sales of 0.5x on TTM basis, as compared to the industry (Media & Publishing) median of 2.5x. Hence, considering the aforesaid fact, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 0.35 on February 24, 2021.

 GVC Daily Technical Chart (as on February 24^th, 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.