•
B10
GLOBE INVESTOR
G
•
T H E G LO B E A N D M A I L
F R I D AY , J U N E 2 4 , 2 0 1 6
STOCK ANALYSIS
.....................................................................................................................................................................................................................................................................................................................................................
Shopping for value among Canadian REITs
.....................................................................................................................................................................................................................................................................................................................................................
CANADIAN-LISTED REAL ESTATE INVESTMENT TRUSTS
PETER ASHTON
.....................................................................................................................................
................................................................
RANK NAME
SYMBOL
1
2
3
4
5
6
7
8
9
CUF.UN-T
AX.UN-T
ONR.UN-T
AAR.UN-T
MRT.UN-T
ACR.UN-T
REI.UN-T
SRU.UN-T
PLZ.UN-T
MKT. CAP. FWD.
($ BIL.) P/E
OPERATING
MARGIN
DIV.
YIELD
33.1%
38.9%
32.8%
42.3%
35.3%
35.7%
45.6%
43.3%
27.7%
8.6%
6.1%
7.6%
5.1%
4.9%
7.7%
5.0%
4.5%
5.3%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number Cruncher
................................................................
What are we looking for?
Canadian real estate investment
trusts with strong yields and
reasonable valuations.
Bonds have been a hot asset
class of late with prices soaring
over the past weeks and
months. In Germany and Japan,
bond yields have now declined
to the point where they are now
offering negative interest rates
for bond durations out to 15
years. Though Canadian bonds
are not offering negative rates of
return, their yields are still very
low. Income-seeking investors
are increasingly turning their attention toward REITs as a source
of dependable monthly income.
................................................................
The screen
We will use Recognia Strategy
Builder to search for REITs that
meet our criteria.
We begin by setting a minimum market cap threshold of
Cominar REIT
Artis REIT
OneREIT
Pure Industrial Real Estate Trust
Morguard REIT
Agellan Commercial REIT
RioCan REIT
Smart REIT
Plaza Retail REIT
$2.9
$1.8
$0.3
$1.1
$0.9
$0.2
$9.1
$5.6
$0.5
9.7
9.2
8.6
10.1
8.8
10.3
17.0
16.5
15.2
Source: Recognia
.....................................................................................................................................
$200-million. Smaller REITs tend
to be more volatile and are subject to additional risk, so we
wish to look at the larger end of
the REIT market.
Next, we will look for REITs
with strong yields. We will
screen for REITs with a yield of
at least 4 per cent a year. In
addition, to find REITs with
healthy, profitable businesses,
we will select only trusts with
operating margins of 25 per cent
or more. Operating margin is a
measure of business efficiency
that indicates how much profit
an enterprise makes on each
dollar of incremental revenue.
Finally, to ensure we are not
overpaying for our investment,
we will look for REITs with reasonable valuations as measured
by their price-to-earnings ratios.
We will select only trusts with a
forward P/E of less than 20.
................................................................
More about Recognia
Recognia is a global leader in
automated quantitative analysis
and engagement solutions for
retail online brokers and institutions. Recognia’s product suite
provides actionable trading
ideas based on technical and
fundamental research covering
stocks, ETFs, indexes, forex,
options and commodities.
................................................................
What did we find?
Cominar Real Estate Investment
Trust ranks No. 1 on our screen.
Cominar owns more than 500
office, retail and industrial properties primarily in Quebec, Ontario and Atlantic Canada. The
trust has a yield of 8.6 per cent
and a forward P/E of 9.7, which
is reasonable compared with its
peers.
OneREIT specializes in owning
and operating retail shopping
malls with 57 properties located
in eight provinces. OneREIT currently offers a 7.6-per-cent dividend yield and has the lowest
forward P/E ratio on our list at
8.6. This trust has had particularly strong performance of late
with the unit price up 14 per
cent in the month of June
alone.
RioCan REIT is the largest
trust on our list with a market
capitalization of $9.1-billion. RioCan owns a portfolio of more
than 350 commercial real estate
properties across Canada and
the United States. The trust
yields 5 per cent and has the
highest operating margin on our
list at 45.6 per cent. RioCan
units have also performed
extremely well this year, currently up 19 per cent year-todate.
Historical performance
Recognia Strategy Builder provides a back-testing capability to
evaluate how well an investing
strategy would have worked in
the past. Using a five-year historical period with quarterly
rebalancing, the screen
described had a 7.3-per-cent
annualized return compared
with 1.8 per cent for the S&P/
TSX 60 index.
The investment ideas presented here are for information only.
They do not constitute advice or
a recommendation by Recognia
Inc. in respect of the investment
in financial instruments. Investors should conduct further
research before investing.
................................................................
Peter Ashton is vice-president of
retail and self-directed investing at
Recognia Inc.
MORE ONLINE
Globe Unlimited subscribers can
read more Number Crunchers at
tgam.ca/cruncher
.....................................................................................................................................................................................................................................................................................................................................................
EYE ON EQUITIES STOCKS THAT SHOULD BE ON YOUR RADAR SCREEN 6 BY DAVID LEEDER
.....................................................................................................................................................................................................................................................................................................................................................
Suncor Energy (SU-TSX)
Close: $36.20, up $1.41
Hydro One (H-TSX)
Close: $24.83, up 1¢
Valeant (VRX-NYSE)
Close: $22.25 (U.S.), up 61¢
Encana (ECA-NYSE)
Close: $8.32 (U.S.), up 18¢
Apple (AAPL-Nasdaq)
Close: $96.10 (U.S.), up 55¢
$ 40.5
$ 25
$US 272
$US 12.5
$US 135
37.0
24
182
9.0
119
33.5
23
92
5.5
103
30.0
22
2
J A S O N D J F M A M
2015
2016
J
F
M
A
M
2016
Canadian oil and gas companies
have adopted a “balance sheet
first approach,” according to
Citigroup analyst Fernando Valle,
who upgraded Suncor Energy
Inc. to “buy” from “neutral.” “SU
has shrewdly increased free cash
flow sensitivity to WTI prices
with their acquisitions of Syncrude stakes from COS [Canadian
Oil Sands Ltd.] and Murphy Oil,”
he said
Target: His target rose to $44
from $40. Consensus is $40.13.
Raymond James analyst Frederic
Bastien downgraded Hydro One
Ltd. to “market perform” from
“outperform,” citing a full
valuation. “We see further upside
as the utility transitions to a
performance-based framework
beyond our forecast horizon, but
aren’t ready to reflect that in a
higher target price just yet,” Mr.
Bastien said.
Target: His target remained $25,
compared with an analyst
consensus of $24.17.
2.0
J A S O N D J F M A M
2015
2016
Citing the potential for a “further
deterioration in business
fundamentals,” JPMorgan analyst
Chris Schott downgraded Valeant
Pharmaceuticals International
Inc. to “neutral” from “overweight.” “We are moving to the
sidelines as we see a number of
uncertainties around core
business trends that are unlikely
to be resolved in the near term,”
he said.
Target: His target moved to
$35 (U.S.) from $50. The average
is $36.
87
J A S O N D J F M A M
2015
2016
Despite the announcement
of the $625-million sale of its
Gordondale Montney assets,
Encana Corp. requires further
asset sales to aid its balance
sheet, Macquarie analyst Chris
Feltin said. Though he said the
sale modestly improves the
company’s debt-to-cash flow
multiple, he downgraded his
rating to “underperform” from
“neutral.”
Target: His target went to $7.50
(U.S.) from $6.50. The average is
$8.60.
J A S O N D J F M A M
2015
2016
Canaccord Genuity analyst T.
Michael Walkley said, based on
his surveys, consumers are
delaying purchases of iPhones
ahead of the launch of the
iPhone 7. Though he projects
steady overall sales because of
increased promotions and a
stronger contribution from the
lower-cost iPhone SE, Mr. Walkley
dropped his estimates for Apple
Inc.
Target: His target fell to $120
(U.S.) from $130 with a “buy”
rating. The average is $123.38.
Help us plan the future of our market data pages. Please send ideas for improvements to [email protected]
ROB 100 LARGEST STOCKS FROM THE TSX COMPOSITE BY MARKET CAPITALIZATION
.....................................................................................................................................................................................................................................................................................................................................................
CLOSE
CHG %CHG
63.56
122.24
53.20
30.79
21.68
44.31
83.27
65.55
24.69
60.25
8.92
1.98
43.97
31.43
37.80
16.18
14.58
76.03
39.41
166.11
-1.07 -1.66
1.91 1.59
1.00 1.92
-.29 -.93
.47 2.22
-.25 -.56
.45
.54
.64
.99
-.54 -2.14
.53
.89
.29 3.36
.03 1.54
-.06 -.14
-.17 -.54
.30
.80
-.12 -.74
.28 1.96
.17
.22
1.33 3.49
2.75 1.68
CLOSE
CHG %CHG
CLOSE
CHG %CHG
22.11
9.83
41.88
86.89
111.34
36.93
22.46
35.70
21.38
15.54
24.83
36.76
40.47
42.79
89.57
26.92
37.86
6.25
68.99
51.22
.19
.87
.49 5.25
.16
.38
-1.52 -1.72
1.02
.92
.15
.41
-.72 -3.11
.34
.96
-.24 -1.11
.41 2.71
.01
.04
.28
.77
.63 1.58
.39
.92
.58
.65
.11
.41
.05
.13
-.09 -1.42
.33
.48
1.22 2.44
CLOSE
CHG %CHG
18.74
27.36
43.75
44.92
21.99
80.90
78.64
38.90
33.65
22.28
29.00
31.38
24.73
36.84
55.16
28.16
43.72
51.31
79.69
37.99
.37 2.01
.42 1.56
.01
.02
.38
.85
.04
.18
.14
.17
.12
.15
.10
.26
.30
.90
1.09 5.14
.27
.94
.22
.71
.58 2.40
-.13 -.35
.79 1.45
-.04 -.14
-.20 -.46
.07
.14
1.22 1.55
.14
.37
CLOSE
CHG %CHG
25.47
25.18
26.58
36.46
52.96
44.19
36.20
16.91
56.66
16.31
41.40
53.54
32.79
57.34
4.39
28.34
42.71
89.74
41.27
6.18
.01
.04
.12
.48
-.20 -.75
-.21 -.57
.98 1.89
.62 1.42
1.41 4.05
.04
.24
.49
.87
.51 3.23
.10
.24
.42
.79
1.20 3.80
.22
.39
.10 2.33
.61 2.20
.98 2.35
-.40 -.44
.86 2.13
-.16 -2.52
................................................................
................................................................
................................................................
................................................................
................................................................
Agnico Eagle Mines
Agrium
Alimentation Couche-T
AltaGas Ltd.
ARC Resources Ltd.
ATCO Ltd.
Bank of Montreal
Bank of Nova Scotia
Barrick Gold Corp.
BCE Inc.
BlackBerry Limited
Bombardier Inc.
Brookfield Asset Mgmt
Brookfield Property
Brookfield Renewable
CAE Inc.
Cameco Corp.
Canadian National Rail
Cdn Natural Resource
Canadian Pacific Rail
Canadian Tire Corporat
Canadian Utilities
CAP REIT
CCL Industries
Cenovus Energy
CGI Group
CI Financial
CIBC
Constellation Software
Crescent Point Energy
Detour Gold
Dollarama Inc.
Eldorado Gold
Element Financial
Emera Inc.
Empire Company
Enbridge Inc.
EnCana Corp.
Fairfax Financial Hol
Finning International
First Capital Realty
First Quantum Mineral
Fortis Inc.
Franco-Nevada Corp.
George Weston
Gildan Activewear
Goldcorp Inc.
Great-West Lifeco
H&R Real Estate Invest
Husky Energy
Hydro One
IGM Financial
Imperial Oil
Industrial Alliance
Intact Financial
Inter Pipeline
Keyera Corp.
Kinross Gold
Loblaw Companies
Magna International
Manulife Financial
Maple Leaf Foods
Metro Inc.
National Bank of Cda
Northland Power Inc.
Onex Corporation
Open Text
Pembina Pipeline Corp
Peyto Exploration
Potash Corp. of Sask.
Power Corp of Canada
Power Financial Corp.
PrairieSky Royalty
Quebecor Inc.
Restaurant Brands Int
RioCan Real Estate In
Ritchie Bros Auctione
Rogers Communications
Royal Bank of Canada
Saputo Inc.
Seven Generations Ene
Shaw Communications
Silver Wheaton
SmartREIT
SNC-Lavalin Group
Sun Life Financial In
Suncor Energy
Tahoe Resources
TD Bank
Teck Resources
TELUS Corp.
Thomson Reuters
Tourmaline Oil
TransCanada Corp.
Turquoise Hill Resour
Valeant Pharmaceutical
Vermilion Energy Inc.
Waste Connections
WSP Global Inc.
Yamana Gold Inc.
140.20
.67
.48
36.57
-.21 -.57
31.65 -.20 -.63
230.00
-.18 -.08
18.74
.53 2.91
59.08
.34
.58
27.14
.12
.44
103.91 1.03 1.00
507.01 -2.01 -.39
20.56
.26 1.28
29.40
-.13 -.44
91.03
.75
.83
5.39
-.13 -2.36
14.68
.14
.96
46.48 -.32 -.68
21.27
.16
.76
54.92
.55 1.01
10.60
.16 1.53
642.40 -.88 -.14
23.53
.74 3.25
ECONOMY AND MARKETS
.....................................................................................................................................................................................................................................................................................................................................................
CURRENCIES
CANADIAN DOLLAR / U.S. EXCHANGE RATE
BONDS
GOVERNMENT OF CANADA BOND YIELD CURVE
..............................................................................................................
..............................................................................................................
..............................................................................................................
Past 12 months
Past 12 months: value in $US
COMMODITIES
THOMSON REUTERS / JEFFERIES CRB INDEX
Past 5 business days
$ 0.79
$ 0.83
230
4%
0.78
Most Recent
1 Week Ago
4 Weeks Ago
2%
0.78
190
0.73
0%
150
J
2015
A
S
O
N
D
J
F
M
A
0.68
M
2016
J A S O N D
2015
J F M A M
2016
0.77
1
F M T W T
3
Months
6
2
3
5
Years
7
10
30
Oil prices rose 2 per cent after a volatile session, with
investors less worried about prospects for the global economy after the last prevote opinion polls showed Britain
was likely to remain in the European Union. The Thomson
Reuters/Jefferies CRB index rose 1.72 points to 194.38.
The Canadian dollar strengthened to a nearly two-week
high against its U.S. counterpart as increased chances that
Britain will remain in the European Union and higher oil
prices supported the risk-sensitive, commodity-linked
currency. The U.S. dollar fell versus a basket of currencies.
Canadian government bond prices were lower across
the maturity curve as increased risk appetite reduced
investor demand for safer assets. U.S. Treasury prices
fell on growing confidence that Britain will vote to
remain in the European Union.
......................................................................................................................
......................................................................................................................
..............................................................................................................
CLOSING PRICES
FOREIGN EXCHANGE CROSS RATES
CANADA
U.S.
..............................................................................................................
..............................................................................................................
....................................................
....................................................
PRICE
CHG
....................................................
. . . . . . . . . . . . . . . . . CAD
. . . . . . . . . . . . .USD
. . . . . . . . . . . .GBP
. . . . . . . . . . . . EUR
. . . . . . . . . . . . . . . .JPY
. . . . . . . . . . . CHF
. . . . . . . . . . . . .MXN
. . . . . . . . . . . AUD
.....
YIELD
CHANGE
....................................................
....................................................
2 Year
5 Year
10 Year
30 Year
2 Year
5 Year
10 Year
30 Year
Oil West Texas US$/bbl
48.85 -0.28
51.02 1.18
Oil Brent US$/bbl
2.70 0.02
Nat Gas H. Hub US$ mmbtu
1263.10 -6.90
Gold US$/troy ounce
17.35 0.04
Silver US$/troy ounce
2.17 0.04
Copper US$/lb
0.78 0.01
Lead US$/lb
0.92 0.00
Zinc US$/lb
0.74 0.00
Aluminum US$/lb
PRICE
CHG
....................................................
Nickel US$/lb
Wheat CBOT US$bsh
Lumber KD W. S-P-F, Mill US$
Framing Lumber Composite
Corn CBOT US$bsh
Soybeans CBOT US$bsh
Canola InStr Vn 1Cda C$ tnne
Feed Barley Lthbr. C$ tnne
Feed Wheat ThdrB C$ tnne
4.18
4.66
320.00
349.00
3.93
11.02
502.20
205.00
232.00
SOURCES: REUTERS, AP, BLOOMBERG, RANDOM LENGTHS, WINNIPEG COMMODITIES
EXCHANGE
0.00
-0.07
0.00
0.00
-0.06
-0.15
-6.80
0.00
0.00
1 CAD=
–
1 USD= 1.2773
1 Br pd= 1.8993
1 Euro= 1.4521
1 Yen= 0.0121
1 Sw fr= 1.3325
1 Peso= 0.0700
1 AUSD= 0.9716
0.7829
–
1.4870
1.1369
0.0094
1.0432
0.0548
0.7606
0.5265
0.6725
–
0.7646
0.0063
0.7015
0.0368
0.5115
0.6886 82.9719 0.7505 14.2919 1.0293
0.8796 105.9800 0.9586 18.2551 1.3147
1.3080 157.5911 1.4254 27.1451 1.9549
– 120.4866 1.0898 20.7539 1.4947
0.0083
– 0.0090 0.1723 0.0124
0.9176 110.5571
– 19.0435 1.3715
0.0482
5.8055 0.0525
– 0.0720
0.6690
80.6115 0.7291 13.8854
–
SOURCES: CANADIANFOREX, BANK OF CANADA, BLOOMBERG
CROSS RATES ARE AS OF 4PM AND ARE SUPPLIED BY CANADIANFOREX
0.63
0.75
1.31
1.93
+0.026
+0.052
+0.070
+0.049
Rates
YIELD
CHANGE
0.78
1.26
1.75
2.55
+0.04
+0.06
+0.06
+0.05
Rates
....................................................
RATE
CHG
0.50
2.70
Unch.
Unch.
....................................................
RATE
CHG
0.25-0.50
3.50
Unch.
Unch.
....................................................
....................................................
BoC overnight target
Canadian Prime
Fed Target rate
U.S. Prime
SOURCES: CBID­ATS, PERIMETER MARKETS INC., BLOOMBERG, REUTERS, AP, CP