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On today’s TSX Breakouts report, there are 14 stocks on the positive breakouts list (stocks with positive price momentum), and 112 securities are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a REIT that is on the positive breakouts list.

This is a defensive security that has historically retained (and increased) its value during times of market turbulence.

On Wednesday, while the S&P/TSX composite index declined 1.9 per cent, the unit price of this REIT rallied nearly 3 per cent to a record close. Furthermore, during the stock market meltdown experienced in the fourth-quarter of 2018, the S&P/TSX composite index declined nearly 11 per cent, while the unit price of this REIT increased 8 per cent.

The REIT operates in an industry with positive fundamentals, which along with management’s acquisition strategy should support future growth. After the REIT reported its second-quarter earnings results, eight analysts issued buy recommendations. The security highlighted today is Minto Apartment Real Estate Investment Trust (MI-UN-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The REIT

Ottawa-based Minto Apartment REIT owns a portfolio of 26 rental properties as at June 30. The majority of the properties are located in Ottawa and Toronto. Other cities where Minto has a presence include Montreal, Calgary and Edmonton.

After the market closed on Aug.12, the REIT reported strong second-quarter financial results. FFO (funds from operations) came in at 21.5 cents per unit, above the Street’s forecast of 20.6 cents per unit. AFFO (adjusted funds from operations) was 18.6 cents per unit. Occupancy for unfurnished suites was 98.7 per cent at quarter-end and same-property occupancy was 99.2 per cent. Same-property NOI (net operating income) was $13.6-million, 8.2 per cent above management’s guidance issued at the time of last year’s initial public offering. This strength was driven by higher revenue and lower operating expenses.

During the quarter, 435 new leases were signed at higher rental rates, and the weighted average monthly rent increased 11.5 per cent to $1,585 from $1,417. The REIT has a healthy balance sheet with a debt-to-GBV (gross book value) ratio of 43 per cent as at June 30. The following trading session, the unit price rallied over 5 per cent on high volume with over 300,000 units traded that day.

The REIT has been active on the acquisition front with two recent purchases completed in May, one in Toronto and one in Montreal. In July, the REIT announced the acquisition of a 40 per cent interest in a property located in Toronto (High Park Village).

To fund these acquisitions, the REIT completed a $173-million financing, issuing over 8. million units at a price per unit of $19.60 in April.

On the earnings call, the chief executive officer Michael Waters remarked on the REIT’s acquisition growth, “The property acquisitions we’ve completed since our IPO (initial public offering) materially expanded and diversified our portfolio. We’ve acquired interests in 2,432 suites, representing growth of 57 per cent in total suite counts since the IPO. Our acquisitions have been located in Toronto, Montreal and Calgary, all primary urban markets in Canada that we targeted for growth. We now have property holdings in five of Canada’s six primary housing markets.”

Mr. Waters also provided a positive outlook, “We think the outlook for our business is very strong. We’ve established a track record of accretive growth in the REIT’s first year of operations and we fully expect it to continue. The distribution increase we announced yesterday illustrate the confidence we have in our business.” He added, “We’ll continue to capitalize on organic growth opportunities that we’ve talked about and that starts with gain-to-lease. As Julie (chief financial officer Julie Morin) said, we currently estimate that our portfolio has an annualized revenue gain opportunity of more than $11.5-million from suite turnover (through higher monthly rental prices) and that figure has moved steadily higher since the IPO as we acquired properties and benefited from healthy rental markets.”

The rental market has robust fundamentals. Demand for apartments is strong, particularly in major cities, due to high home purchase prices and rising housing demand from population growth.

This small-cap security has a market capitalization that is just below $1-billion, currently at $993-million.

Distribution policy

The REIT pays its unitholders a monthly distribution of 3.67 cents per unit, or 44 cents per unit on a yearly basis. This equates to an annualized yield of 2 per cent. This yield is relatively comparable to its peers. Canadian Apartment Properties REIT (CAR.UN-T), or CAPREIT, has a current yield of 2.7 per cent and InterRent REIT (IIP.UN-T) has a current yield of 1.9 per cent.

On Aug. 12, the REIT announced a 7.4 per cent distribution hike, increasing its monthly distribution to 3.67 cents per unit from 3.416 cents per unit.

In the second quarter, the AFFO payout ratio stood at 55.2 per cent, a conservative ratio with amble room for further distribution increases in the future.

Analysts’ recommendations

After the REIT released its second-quarter financial results, eight analysts issued research reports - all of which were buy recommendations.

The eight firms providing recent research coverage on the REIT are as follows in alphabetical order: BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, Desjardins Securities, Industrial Alliance Securities, Raymond James, RBC Dominion Securities, and TD Securities.

Revised recommendations

This week, six analysts made revisions to their expectations – all higher.

RBC’s Matt Logan lifted his target price for a second time this year to $23.50 from $21.50. CIBC’s Dean Wilkinson increased his target price by $1 to $23. Desjardins’ Michael Markidis raised his target price for the fourth time this year to $23.50 from $22. Canccord Genuity’s Brendon Abrams raised his target price to $25 from $22.50. TD Securities’s Jonathan Kelcher took his target price up by $1 to $25, which was his third target price hike made this year. Industrial Alliance’s Brad Sturges upgraded his recommendation to a “strong buy” from a “buy” and increased his target price to $25 from $22.

Financial forecasts

The Street is forecasting FFO per unit of 87 cents in 2019, rising to 93 cents in 2020. The consensus AFFO per unit estimates are 74 cents in 2019 and 80 cents in 2020.

Financial forecasts have been climbing higher. For instance, three months ago, the consensus FFO per unit estimates were 85 cents for 2019 and 90 cents for 2020. The AFFO per unit estimates were 72 cents for 2019 and 77 cents for the following year.

Valuation

The REIT is not cheap.

According to Bloomberg, the REIT is trading at a price-to-FFO multiple of 23.4 times the 2020 consensus estimate, its highest level since being publicly listed. The REIT is trading at a price-to-AFFO multiple of 27 times the 2020 consensus estimate. Peer CAPREIT (CAR-UN-T) is trading at a price-to-FFO multiple of 22.6 times the 2020 consensus estimate, while Killam Apartment REIT (KMP-UN-T) is trading at a price-to-FFO multiple of 19 times the 2020 consensus estimate.

Looking at the eight target prices updated by analysts this week, the average 12-month target price is $23.69, suggesting the unit price has over 8 per cent upside potential over the next year. Individual target prices are as follows in numerical order: $22, $22.50, $23, two at $23.50, and three at $25.

Insider transaction activity

Year-to-date, there has not been any buying or selling activity in the public market reported by insiders.

Chart watch

The REIT began trading on the Toronto Stock Exchange in July 2018. Given the REIT’s brief trading history, technical analysis is limited.

On Wednesday, the S&P/TSX composite index was under pressure, falling over 300 points or 1.9 per cent; however, the unit price of this REIT rallied nearly 3 per cent to a record close. Year-to-date, the unit price is up almost 18 per cent, and is up 50 per cent from its initial public offering price, which was priced at $14.50 in June 2018.

Given the spike in the unit price this week, the unit price may need to fill in this gap and could trade sideways in the near-term between $21.50 and $22 as its digests these gains. In terms of key resistance and support levels, there is initial overhead resistance around $22, and after that around $23.50. Should the unit price rollover, there is initial downside support between $20 and $20.50, close to its 50-day moving average (at $19.73). Failing that, there is technical support around $19, close to its 200-day moving average (at $19.15).

This small-cap security has relatively low liquidity. The three-month historical daily average trading volume is approximately 100,000 units.

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, financial forecasts, 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.

Positive BreakoutsAug. 14 close
AQN-TAlgonquin Power & Utilities Corp $17.19
AP-UN-TAllied Properties REIT $51.09
ABX-TBarrick Gold Corp $24.21
BEP-UN-TBrookfield Renewable Energy Partners LP $47.84
ELD-TEldorado Gold Corp $11.37
EMP-A-TEmpire Co Ltd $36.45
H-THydro One Ltd. $23.89
KPT-TKP Tissue Inc $8.83
MRU-TMetro Inc $53.75
MI-UN-TMinto Apartment REIT $21.80
NG-TNovagold Resources Inc $9.20
RBA-TRitchie Bros Auctioneers Inc $50.94
RAY-A-TStingray Digital Group Inc. $7.30
Y-TYellow Pages Ltd $8.25
Negative Breakouts
AFN-TAg Growth International Inc $41.83
AGF-B-TAGF Management Ltd $4.67
ALC-TAlgoma Central Corp $12.49
ALS-TAltius Minerals Corp $11.34
ARX-TARC Resources Ltd $5.96
ATA-TATS Automation Tooling Systems Inc $19.39
BAD-TBadger Daylighting Ltd $40.85
BMO-TBank of Montreal $92.70
BNS-TBank of Nova Scotia $67.71
BTE-TBaytex Energy Corp $1.71
BIR-TBirchcliff Energy Ltd $2.10
BDT-TBird Construction Inc $5.09
BBD-B-TBombardier Inc $1.71
BNE-TBonterra Energy Corp $4.01
CFW-TCalfrac Well Services Ltd $1.42
CCO-TCameco Corp $10.87
CNQ-TCanadian Natural Resources Ltd $31.00
CWX-TCanWel Building Materials Group Ltd. $4.31
CJ-TCardinal Energy Ltd $2.08
CCL-B-TCCL Industries Inc $59.15
CHW-TChesswood Group Ltd $8.70
CHR-TChorus Aviation Inc $7.27
CM-TCIBC $99.14
CMG-TComputer Modelling Group Ltd $6.23
BCB-TCott Corp $16.03
DML-TDenison Mines Corp $0.54
DSG-TDescartes Systems Group Inc $44.86
DHX-TDHX Media Ltd $1.55
DRT-TDIRTT Environmental Solutions $6.72
DIV-TDiversified Royalty Corp $2.74
UFS-TDomtar Corp. $45.14
EFX-TEnerflex Ltd $13.22
ESI-TEnsign Energy Services Inc $2.91
XTC-TExco Technologies Ltd $7.28
FAH-U-TFairfax Africa Holdings Corp. $7.41
FFH-TFairfax Financial Holdings Ltd $584.00
FM-TFirst Quantum Minerals Ltd $8.96
FRU-TFreehold Royalties Ltd $7.55
GH-TGamehost Inc $8.71
GIL-TGildan Activewear Inc $47.72
GSV-TGold Standard Ventures Corp. $1.14
GSC-TGolden Star Resources Ltd. $3.80
GTE-TGran Tierra Energy Inc $1.81
GWO-TGreat-West Lifeco Inc $27.60
HWO-THigh Arctic Energy Services Inc $2.30
HLS-THLS Therapeutics Inc. $14.53
HBM-THudBay Minerals Inc $4.23
HSE-THusky Energy Inc $8.55
IBG-TIBI Group Inc. $4.78
IGM-TIGM Financial Inc $34.54
IMO-TImperial Oil Ltd $32.39
IPCO-TInternational Petroleum Corp. of Sweden $4.34
KEL-TKelt Exploration Ltd $2.78
KXS-TKinaxis Inc $75.77
KML-TKinder Morgan $10.70
LIF-TLabrador Iron Ore Royalty Corp $26.57
LAC-TLithium Americas Corp $4.60
LUC-TLucara Diamond Corp $1.15
MAL-TMagellan Aerospace Corp $15.47
DR-TMedical Facilities Corp $7.17
MRD-TMelcor Developments Ltd $12.12
MX-TMethanex Corp $42.86
TPX-B-TMolson Coors Canada Inc. $69.90
MRT-UN-TMorguard Real Estate Investment Trust $11.38
MTL-TMullen Group Ltd $8.98
NEO-TNeo Performance Materials Inc. $10.96
NXE-TNexGen Energy Ltd. $1.60
NWH-UN-TNorthWest Healthcare Properties REIT $11.42
NVA-TNuVista Energy Ltd $1.70
OTEX-TOpen Text Corp $50.05
OGI-TOrganigram Holdings Inc. $7.17
ORL-TOrocobre Ltd. $2.25
POU-TParamount Resources Ltd $5.59
PXT-TParex Resources Inc $19.67
PSI-TPason Systems Inc $16.40
PAT-TPatriot One Technologies Inc. $1.70
PEY-TPeyto Exploration & Development Corp $3.06
PBL-TPollard Banknote Ltd. $20.17
POW-TPower Corp of Canada $26.82
PWF-TPower Financial Corp $27.23
PSK-TPrairieSky Royalty Ltd $16.11
PD-TPrecision Drilling Corp $1.49
RFP-TResolute Forest Products Inc. $6.21
RME-TRocky Mountain Dealerships Inc $6.80
RCI-B-TRogers Communications Inc $67.61
ROOT-TRoots Corp. $3.17
RY-TRoyal Bank of Canada $98.83
SIS-TSavaria Corp. $11.40
SES-TSecure Energy Services Inc $6.06
SJR-B-TShaw Communications Inc $25.39
SCL-TShawCor Ltd $16.51
SW-TSierra Wireless Inc $14.53
SRU-UN-TSmartCentres Real Estate Investment Trust $31.95
STN-TStantec Inc $28.47
STLC-TStelco Holdings Inc. $12.02
SOX-TStuart Olson Inc $2.80
SLF-TSun Life Financial Inc $51.70
TVE-TTamarack Valley Energy Ltd. $1.78
TECK-B-TTeck Resources Ltd $22.20
TVK-TTerraVest Capital Inc $12.73
TFII-TTFI International Inc. $37.33
TWM-TTidewater Midstream and Infrastructure Ltd. $1.09
TOG-TTORC Oil & Gas Ltd $3.31
TD-TToronto-Dominion Bank $72.81
TOU-TTourmaline Oil Corp $12.55
RNW-TTransAlta Renewables Inc $12.85
TCW-TTrican Well Service Ltd $0.84
TCN-TTricon Capital Group Inc $9.58
TSU-TTrisura Group Ltd. $28.55
VET-TVermilion Energy Inc $19.65
WCP-TWhitecap Resources Inc $3.74
YGR-TYangarra Resources Ltd. $1.41

Source: Bloomberg

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
MI-UN-T
Minto Apartment REIT
+1.02%15.83

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