Canadian Apartment Properties Real Estate Investment Trust

Canadian Apartment Properties Real Estate Investment Trust (TSX: CAR.UN) or CAPREIT is one of the leading real estate investment trusts in Canada.

During the quarter, the Group acquired a total of 1,724 suites at a price consideration of CAD 467.5 million, which includes a portfolio of 1,503 suites located in Halifax, Nova Scotia expanding the Group’s Halifax portfolio to over 3,100 suites. The Group declared a quarterly dividend of CAD 0.115 per unit, payable on June 15, 2020.

Q1FY20 Financial Highlights: For the period ended March 31, 2020, CAR.UN impresses with its quarterly performance and reported a solid 18.8% y-o-y growth in total operating revenues at CAD 216.06 million. The increase was driven by higher monthly rents coupled with high occupancies and additional support from acquisitions. Net rental income stood at CAD 138.05 million, as compared to CAD 113.83 million in pcp. The Company reported overall portfolio occupancy at 98.2%, against 98.7% in the previous corresponding period. Net income slump to CAD 79.63 million, as compared to CAD 205.51 million in pcp due to loss of CAD 31.02 million from fair value adjustments of investment properties and a loss from on foreign currency translation. Funds from operations stood higher at CAD 92.51 million, as compared to CAD 73.81 million in the previous corresponding period. Overall portfolio net Average Monthly Rents increased to CAD 1,105, higher than CAD 1,093 million in pcp.

Q1FY20 Income Statement Highlights (Source: Company Reports

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The Group is having a strong financial position and has enough liquidity (CAD 182.3 million of cash & cash equivalents and CAD 99.2 million of Credit Facilities) which seems sufficient to support its near-term requirements. CAR.UN showed improved operational efficiency and reported NOI margin at 63.9%, as compared to 62.6% in the previous corresponding period, which is impressive. The Company made capital investments of CAD 42.7 million for developing its existing properties. We have valued the stock using van EV/EBITDA multiple based relative valuation method and have arrived at a target upside of lower single digit (in percentage terms). For the said purposes, we have considered Allied Properties Real Estate Investment Trust, InterRent Real Estate Investment Trust and Northview Apartment REIT as peers. Hence, we recommend a ‘Watch’ stance on the stock at the current market price of CAD 47.58 on May 27, 2020 and would advise investors to wait for a better entry point.

CAR.UN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Altus Group Ltd

Altus Group Ltd (TSX: AIF) is a real estate investment & services company based out of Canada. It is engaged in the business of providing technology-enabled, data solutions and software services to commercial real estate industry.

Financial Highlights – Q1 Financial Year 2020 (31^st March 2020, CAD, thousand)

(Source: Quarterly Report, Company Website)

In the first quarter of the financial year 2020, driven by an increase in the revenue from Altus Analytics, Altus Analytics Over Time and CRE Consulting, the total revenue surged by 11.90 per cent to CAD 131,256 thousand as against CAD 117,348 thousand in Q1 FY2019. The adjusted EBITDA declined by 2.3 per cent to CAD 13,248 thousand in Q1 FY2020 versus an adjusted EBITDA of CAD 13,557 thousand in Q1 FY2019, and the adjusted EBITDA margin stood at 10.1 per cent for the period. The group reported PBT (Profit before tax) from continuing operations stood at CAD 2,518 thousand in Q1 FY2020 versus an LBT (loss before tax) from continuing operations of CAD 384 thousand in Q1 FY2019. The PAT (Profit after tax) from continuing operations stood at CAD 1,757 thousand in the first quarter of the financial year 2020 versus CAD 456 thousand in Q1 FY2019. The Net loss attributable to shareholders was at CAD 3,679 thousand in Q1 FY2020 versus a Net loss attributable to shareholders of CAD 435 thousand in Q1 FY2019. The basic and diluted loss per share from continuing operations stood at CAD 0.04 in Q1 FY2020 versus a basic and diluted loss per share from continuing operations of CAD 0.01 in the first quarter of the financial year 2019. The cash balance as on 31^st March 2020 stood at CAD 71,158 thousand versus CAD 60,262 thousand as on 31^st December 2019.

Share Price Performance

Daily Chart as of 27^th May 2020, before the market close (Source: Refinitiv, Thomson Reuters)

Altus Group Ltd shares were trading at CAD 42.47 at the time of writing before the market close on 27^th May 2020. Stock's 52 weeks High is CAD 48.77 and Low is CAD 29.00.

Conclusion

The Group has shown a decline in financial performance in the first quarter of the financial year 2020. The revenue has increased for the period with improved performance from all businesses, while the bottom-line performance has declined and remained in the negative zone. The adjusted EBITDA has also declined in the Q1 of the financial year 2020. The Group has a diversified business model, and revenue is supported by a blue-chip client base. The company’s operations are impacted by the outbreak of covid-19 and are focused on ensuring the health and safety of its employees and customers. AIF has enabled remote access for its employees to support business continuity. The market conditions in which the company operates is full of challenges and might impact the operational performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the company. The Group has taken measures to reduce costs, maximise cash flow and enhance efficiency.

Based on the factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of CAD 42.58 (as on 27^th May 2020, before the market close), with support from few catalysts needs to be evaluated at a later stage.

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.