It is the final trading day of January.
This morning, key commodity prices are mixed. The price of natural gas futures are down sharply, falling by approximately 2 per cent, while the price of oil is relatively neutral. The price of gold is up, back above the $1,200 (U.S.) level.
Today, in economic news, Canadian gross domestic product for the month of November will be released. In the U.S., November home prices, the S&P CoreLogic Case-Shiller 20-City Composite Home Price Index figures, will be released. In addition, the U.S. Federal Reserve kicks off its two-day meeting.
Briefly recapping Monday's performances, major North American equity markets started the week off with losses.
In the U.S., the Dow Jones Industrial Average declined 0.61 per cent, the S&P 500 index lost 0.60 per cent, and Nasdaq composite index fell 0.83 per cent.
Turning to Canada, the S&P/TSX composite index tumbled 171 points, or 1.10 per cent, led by weakness in energy stocks. Every single sector in the TSX Index closed in the red. There were just 30 securities in the TSX Index that advanced, 214 securities declined in value, and five stocks closed the day unchanged.
Month to- date, the TSX Index is up 0.77 per cent.
On today's TSX Breakouts report, there are nine stocks on the positive breakouts list (stocks with positive price momentum), and 24 securities on the negative breakouts list (stocks with negative price momentum), of which more than half are energy stocks.
The security highlighted today appears on the negative breakouts list and may be one to put on your radar screen. The unit price continues to drift lower causing its valuation to become increasingly interesting - CT Real Estate Investment Trust (CRT.UN-T). The REIT offers investors a stable, attractive 4.8-per-cent yield with payout ratio of 80 per cent, and there has been recent insider buying activity.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The REIT
CT REIT owns income-producing commercial properties, with Canadian Tire stores being its major, stable tenant representing over 90 per cent of annualized base minimum rent. The REIT's portfolio consists of over 300 properties located across the country. CT REIT has average annual rent increases built into the property leases at Canadian Tires stores of 1.5 per cent, providing the REIT with predictable same-store net operating income growth. Also positive, in addition to the annual rent escalations, CT REIT has long-term leases.
After the market closed on Nov. 1, CT REIT reported financial results relatively in-line with expectations. The REIT reported funds from operations (FFO) of 27 cents per unit, compared to the consensus estimate of 26 cents per unit. Adjusted funds from operations (AFFO) came in at 22 cents per unit, a cent about the Street's forecast.
The REIT's balance sheet is strong. At the end of the third quarter, the debt-to-gross book value was 47 per cent. CT REIT has the financial flexibility to fund future growth. Ken Silver, the chief executive officer, highlighted management's growth objectives on the third quarter conference call stating, "I'd just like to point out that our pipeline of investments continues to build for 2017. In addition to the Totem Mall acquisition in Fort St. John, we also announced yesterday that we will be acquiring three Canadian Tire anchored strip plazas from CTC in the first quarter of 2017 and we'll be completing one small intensification project later in the year."
The REIT is scheduled to report its fourth quarter results after the market closes on Feb. 13. The consensus FFO per unit estimate is 26 cents.
Distribution policy
The REIT pays unitholders a monthly distribution 5.833 cents per unit or 70 cents per unit on a yearly basis. This equates to an annualized yield of 4.8 per cent.
The AFFO payout ratio was 80 per cent for the first nine months of 2016.
In December, management announced a 3 per cent increase to its monthly distribution. While the REIT has only been publicly listed for three years, management has announced three distribution increases during this period.
Valuation
According to Bloomberg, the REIT is trading at a price-to-FFO multiple of 13 times the 2017 consensus estimate. This valuation is relatively in-line with its three-year historical average of 12.7 times and below its peak multiple of nearly 15 times during this period.
Analysts' target prices range from a low of $15 to a high of $16.50. Individual target prices supplied by 10 firms are as follows in numerical order: two at $15, three at $15.50, $15,75, $15,80, two at $16, and $16.50. The consensus one-year target price is $15.65, suggesting the unit price has 7 per cent upside potential over the next 12 months.
Analysts' recommendations
According to Bloomberg, 11 analysts cover the REIT, two analysts have 'buy' recommendations and nine analysts have 'hold' recommendations.
The 11 firms providing research coverage are as follows in alphabetical order: BMO Capital Markets, Canaccord Genuity, CIBC World Markets, Desjardins Securities, GMP, National Bank Securities, Raymond James, RBC Capital Markets, Scotia Capital, TD Securities and Veritas Investment Research.
Recent revisions by analysts
In November, four analysts raised their target prices. Michael Markidis, the analyst from Desjardins Securities, as well as Sam Damiani, the analyst from TD Securities, both increased their target prices to $16 from $15.50. Jimmy Shan, the analyst from GMP, bumped his target price to $15 from $14.75. Lastly, Pammi Bir, the analyst from Scotia Capital hiked the target price for CT REIT to $16.50 from $15.75.
Financial forecasts
Steady growth is forecast for CT REIT. The consensus FFO per unit estimate is $1.07 for 2016, rising to $1.12 for 2017 and to $1.16 in 2018. The consensus AFFO per unit estimates are 86 cents in 2016, 92 cents in 2017, and 97 cents in 2018.
Financial forecasts have been stable. For instance, one year ago, the consensus FFO per unit estimates were $1.07 for 2016 and $1.11 for 2017. The AFFO per unit estimates were 86 cents for 2016 and 90 cents for the following year.
Insider transaction activities
On Dec. 13, Brent Hollister, who sits on the Board of Trustees, purchased 10,000 units.
Chart watch
Year-to-date, the unit price is down 3 per cent. The unit price has been drifting lower but for the most part, not on high volume.
Since May 2016, the unit price has been consolidating, trading principally between $14.70 and $15.70.
In terms of key resistance and support levels, the share price is approaching initial downside support around $14.
The relative strength index is at 39, suggesting the shares are not yet in oversold territory. Generally, a reading of 30 or below indicates an oversold condition.
===
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.