On today's TSX Breakouts report, there are 53 stocks on the positive breakouts list (stocks with positive price momentum), and 12 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a security that may soon resurface on the positive breakouts list, Pure Industrial Real Estate Trust or PIRET (AAR.UN-T). This REIT has been a solid performer for investors. Year-to-date, PIRET is the top performing real estate investment trust in the S&P/TSX composite index (based on price return). In 2016, PIRET delivered a total return (including the distribution) of 36 per cent, well above the 17.6 per cent total return for the S&P/TSX composite REIT index and the 21.1 per cent total return for the S&P/TSX composite index. The REIT has 10 buy recommendations and offers investors a stable distribution, currently yielding 4.7 per cent.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Trust
As indicated in an investor presentation from last month, Pure Industrial Real Estate Trust owns a portfolio of 170 industrial properties across Canada as well as in the United States with a focus on major markets such as Toronto, Vancouver, Texas, Georgia, and North Carolina. The Trust is a beneficiary to the strength in the e-commerce retail market with its growing demand for warehouse space; e-commerce represents approximately 30 per cent of PIRET's portfolio. PIRET's largest tenant is FedEX, representing 21 per cent of revenue. Global retailer IKEA is also one of the Trust's top tenants, accounting for approximately 5 per cent of revenue. The Trust's lease maturing profile is attractive with expiring leases well dispersed, 33 per cent of its leases expire after 2023. The weighted average lease term is just over 6 years.
On July 25, management announced plans to acquire eight Canadian properties at a total cost of approximately $365-million, four facilities in the Greater Toronto Area, two in Montreal, and two properties in Edmonton. To finance these acquisitions, the Trust announced a $200-million equity financing, issuing 31.25-million units at a price of $6.40 per unit. This marks the second equity financing announced so far this year. Back in March, the Trust announced a bought deal equity financing, raising $125-million through the issuance of 20.85-million units at a price of $6 per unit.
The Trust will be releasing its third-quarter financial results after the market closes on Wednesday November 8 and management will be hosting a conference call the following day. The consensus FFO per unit estimate is 10 cents.
In August, the company reported second-quarter financial results that were in-line with expectations with reported funds from operations (FFO) per unit of 10 cents.
Distribution policy
The Trust pays its unitholders a monthly distribution of 2.6 cents per unit, or 31.2 cents per unit on a yearly basis. This equates to an annualized yield of 4.7 per cent. The Trust has maintained its distribution at this level since 2012.
The distribution appears sustainable with the AFFO payout ratio at 89.7 per cent in the first half of 2017.
Analysts' recommendations
There are 12 analysts that cover the Trust, of which 10 analysts have buy recommendations and two analysts have hold recommendations.
The 12 firms providing research coverage are as follows in alphabetical order: BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Desjardins Securities, Echelon Wealth Partners, Eight Capital, GMP, Industrial Alliance Securities, National Bank Financial, Raymond James, RBC Capital Markets, and Scotia Capital.
Revised recommendations
Over recent months, the majority of analysts have maintained their target prices.
The most recent revision occurred in August. Neil Downey, the analyst from RBC Capital Markets, raised his target price to $7 from $6.75, but maintained his "sector perform" recommendation.
Financial forecasts
Analysts are forecasting modest earnings growth for the Trust. The consensus funds from operations (FFO) per unit estimates are 41 cents for 2017 and 44 cents for 2018. The consensus adjusted funds from operations (AFFO) per unit estimates are 36 cents for 2017 and 40 cents in the following year.
Financial forecasts have been stable over recent months. These consensus figures are unchanged from where they were four months ago.
Valuation
The Trust is trading at a price-to-FFO multiple of 15 times the 2018 consensus estimate, and at a price-to-AFFO multiple of over 16 times the 2018 consensus estimate.
Target prices range from a low of $6.75 (at Scotia Capital) to a high of $7.50 (at Canaccord Genuity). The average one-year target price is $7.05, implying there is approximately 6.5 per cent upside potential in the unit price over the next 12 months. Individual target prices provided by 11 firms are as follows in numerical order: $6.75, seven at $7, $7.15, $7.30, and $7.50.
Insider transaction activities
So far in 2017, there have only been two very small insider transactions reported in the public market – both small purchases by the president and chief executive officer Kevan Gorrie,
On Sept. 5, he bought 600 units at an average price per unit of $6.63, and on June 12, he acquired 375 units at an average price per unit of $6.87. These small trades lifted his portfolio's holdings to 260,777 units.
Chart watch
Year-to-date, the Trust has been a solid performer with its unit price rising over 18 per cent, making it the top performing real estate investment trust and one of the top performing securities in the S&P/TSX composite real estate sector index. During the first half of 2017, the price momentum was positive but this strength has paused over recent months with the unit price stabilizing in the low $6 range. However, over the past several days, the unit price has climbed higher on large volume.
Over the past two trading sessions, the unit price has rallied nearly 3 per cent. On Friday, the unit price climbed 1.5 per cent with over 3.3-milliion shares traded, well above the three-month historical daily average trading volume of approximately 1.5-million units.
Looking at key resistance and support levels, the unit price has major overhead resistance around the $7 level. Looking at the downside, there is initial support at $6.36, where its 200-day moving average lies.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.