Timbercreek Financial Corp.

Resilience in Mortgage Portfolio: Timbercreek Financial Corp. (TSX: TF) is a Canada-based non-banking commercial real estate lender. As on 18 August 2020, the market capitalization of the company stood at ~CAD 697.75 million.

Quarterly Performance (For the Period ended 30 June 2020): During the three months ended 30 June 2020, the company maintained its conservative portfolio risk position and focused on income-producing commercial real estate. Despite the softer market conditions due to the global pandemic, the mortgage portfolio of the company continued to perform well, demonstrating resilience. During the quarter, the company delivered adjusted net income and comprehensive income of CAD 11.5 million and distributable income of CAD 14.8 million. In the same time span, the company paid CAD 14.2 million in dividends to shareholders. During the quarter, the company witnessed lower new investment volume, which was offset by lower repayments and higher renewals. This resulted in quarterly growth of the mortgage portfolio to CAD 1,210.3 million as compared to CAD 1,191.1 million in Q1.

Quarterly Financial Highlights (Source: Company Reports)

Key Risks: The spread of the COVID-19 pandemic may impact the company’s borrowers and tenants, thereby impacting performance of the company. The current environment was a slowdown in transaction activity across the industry, resulting in lower turnover and more renewals in the company’s portfolio.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company continues to meet its distributable income targets and retains a decent capital position to take advantage of improved transaction volumes. As per TSX, the stock of TF is inclined towards its 52-weeks’ high of CAD 10.30 but retains potential for further growth. The stock of TF gave a return of 11.01% in the past three months. We have valued the stock using the price to earnings multiple based illustrative relative valuation and have arrived at a target upside of low double-digit (in percentage terms). Considering the current trading levels, decent returns in the past three months, resilient financial highlights, and decent capital position, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 8.57, up by 0.12% on 18 August 2020.

TF Daily Technical Price Chart (Source: Refinitiv, Thomson Reuters)

Fiera Capital Corporation

Resilient Business Model: Fiera Capital Corporation (TSX: FSZ) is a Canadian asset management company that offers traditional and alternative investment solutions. As on 18 August 2020, the market capitalization of the company stood at ~CAD 873.52 million.

Quarterly Performance (For the Period ended 30 June 2020): During the three months ended 30 June 2020, the company reported Assets under Management of CAD 171 billion, reflecting an increase of 8% on the previous quarter. In the same time span, revenues of the company increased by 11% on the pcp and stood at CAD 166.9 million. Adjusted EBITDA stood at CAD 51.9 million as compared to CAD 43.5 million in the first quarter of 2020. During the quarter, EBITDA margin of the company witnessed an improvement over the previous quarter and stood at 31.1% and adjusted net earnings per share went up to CAD 0.38 from CAD 0.2 in the 1Q20. The improvement in results shows resilience of the business model against a volatile and uncertain economic environment. During the quarter, the company continued to win specialized and multi-asset new mandates across public and private market strategies and followed a prudent approach to capital allocation. The company retained a healthy balance sheet and approved a dividend payment of 21 cents per share.

Change in AUM (Source: Company Reports)

Closure of the Fiera Capital Income Opportunities Fund: The company has recently announced the closure of Fiera Capital Income Opportunities Fund with effect from 6 October 2020, mainly because of the small number of unitholders and assets under management in the Fund.

Key Risks: The company is susceptible to a variety of risks and uncertainties including the risks from the market and general economic conditions, the nature of the financial services industry, and the risks and uncertainties from Fiera Capital's interim condensed and annual consolidated financial statements.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)

Price to Book Value Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company is strengthening its position as a trusted investment advisor and is prioritizing to execute its strategic initiatives in the coming months. The company will pay its interim dividend of CAD 0.21 on 23 September 2020. As per TSX, the stock of FSZ is inclined towards its 52-weeks’ high level of CAD 13.18 but retains potential for further growth. The stock of FSZ gave a return of 32.43% in the past three months and a return of 4.39% in the last one month. We have valued the stock using the price to book value multiple based illustrative relative valuation and have arrived at a target upside of low double-digit (in percentage terms). Considering the current trading levels, decent returns in the past three months, resilient business model and modest long term outlook, we recommend a ‘Hold’ rating on the stock at the closing market price of CAD 10.70, down by 2.37% on 18 August 2020.

FSZ Daily Technical Chart (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.