Loblaw Companies Limited
Loblaw Companies Limited (TSX: L) is one of Canada's largest grocery, pharmacy, and general merchandise retailers. It operates the most expansive store footprint in Ontario and maintains sizable presences in provinces like Quebec and British Columbia. Key grocery banners include Loblaws, No Frills, and Maxi, while its pharmaceutical operations are the product of its 2014 acquisition of Shoppers Drug Mart.
Key Highlights:
Key Takeaways from Q3FY20 results:
Source: Company Reports
Q3FY20 Income Statement Highlights (Source: Company Reports)
Risks: Lower consumer spending, coupled with a decline in the traffic, might act as a drag for the company, which would dampen the overall performance of the company.
Valuation Methodology (Illustrative): Price to CF based
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
Stock Recommendation:
The company caters to the retail consumers, and the demand is likely to remain strong due to the demand dynamics within the retail segment, which is a key positive and would support the future income. Loblaw continued to make investments to enhance the overall value proposition for consumers, maintaining its promotional intensity through the pandemic to retain its share gains in conventional banners and further improve its positioning in discount banners. We have valued the stock using Price to CF based relative valuation approach and arrived at a target price offering double-digit upside potential (in % terms). We have considered peers like Metro Inc, Alimentation Couche-Tard Inc etc. Hence considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock at the closing price of CAD 65.17 on November 17, 2020.
L Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
Riocan Real Estate Investment
Riocan Real Estate Investment Trust (TSX: REI) is a Canadian real estate investment trust which owns, develops, and operates Canada's portfolio of retail-focused, increasingly mixed-use properties.
Recent Developments
Key Highlights:
Dividend History. Source: Refinitiv (Thomson Reuters)
Product Pipeline (Source: Company Presentations)
Q3FY20 Financial Highlights:
Source: Company Presentation
Q3FY20 Income Statement Highlights (Source: Company Reports)
Risks: The company might witness a fall in rent collection due to a decline in the consumer income on account of COVID-19 pandemic. Furthermore, traction for the value-added services might decline due to the lower demand scenario.
Valuation Methodology (Illustrative): Price to Earnings based
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
Stock Recommendation:
The company’s shared recorded a crossover on the daily price chart, with price closes above its crucial resistance level of 200-day SMA, which is a bullish technical indicator. Further, in the last two trading sessions, its shares managed to trade above its long-term resistance, which implies that stock has created a new strong support level. Also, the stock is yielding gigantically higher with a dividend yield of 8.3%. Further, the company reported solid liquidity of CAD 803 million, which seems sufficient to surpass the current challenging environment.
Therefore, based on the above rationale, technical strength in the stock and valuation, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 17.30 on November 17, 2020. We have considered peers like SmartCentres Real Estate Investment Trust, SmartCentres Real Estate Investment Trust etc.
1-Year Daily Price Chart (as on November 17, 2020, after the market close). 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.