On Tuesday, the U.S. consumer confidence figure soared to its highest level since December 2000, which helped lift North American equity markets.
Briefly recapping Tuesday's stock market returns, in the U.S., the Dow Jones Industrial Average and S&P 500 each rallied 0.73 per cent, and the Nasdaq composite index increased 0.60 per cent.
Turning to Canada, the S&P/TSX composite index added 35 points, or 0.60 per cent. There were 167 securities in the TSX Index that advanced, 77 securities declined in value, and seven stocks closed the day unchanged.
The TSX Index is up 2.03 per cent year-to-date.
On today's TSX Breakouts report, there are 42 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 recently appeared on the positive breakouts list but has since seen its unit price pullback due to an equity financing announcement. The security I am referred to is Pure Industrial Real Estate Trust (AAR.UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Trust
Pure Industrial Real Estate Trust (PIRET) owns a portfolio of 164 industrial properties. Its greatest geographical presence is in Ontario, where it has 74 properties, representing 35 per cent of the Trust's total gross leasable area (GLA). The Trust's U.S. exposure represents its second largest exposure at 31 per cent of total GLA, followed by Alberta at 18 per cent.
The Trust's largest tenant is FedEX, representing 25 per cent of revenue. PIRET is a beneficiary from the expansion of e-commerce retail sales with growing demand for warehouse properties.
On the fourth-quarter earnings conference call held on March 9, Kevan Gorrie, the president and chief executive officer, defined the Piret's 2017 core objectives, stating, "We will continue to dispose of noncore assets accretively and redeploy the proceeds to new acquisitions and development in our target markets, namely, Toronto, Vancouver, Texas, Georgia and North Carolina."
On March 27, 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. Management plans to use the proceeds to reduce debt levels as well as fund future acquisitions.
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 5.2 per cent. The Trust has maintained its distribution at this level since 2012.
The distribution appears sustainable with the AFFO payout ratio at 86.6 per cent in 2016.
Analysts' recommendations
There are 13 analysts that cover the Trust, of which, eight analysts have "buy" recommendations, three have "hold" recommendations, and two analysts are currently restricted on the Trust given the equity financing.
The 13 firms providing research coverage are as follows in alphabetical order: BMO Capital Markets, CIBC World Markets, Canaccord Genuity, Desjardins Securities, Echelon Wealth Partners, Eight Capital, EVA Dimensions, GMP, Industrial Alliance Securities, National Bank Financial, Raymond James, RBC Capital Markets, and Scotia Capital.
Revised recommendations
Numerous analysts have recently made revisions to their target prices – all of which have been positive revisions.
In March, before being restricted on the Trust, Heather Kirk, the analyst from BMO Capital Markets, raised her target price to $6.45 from $6, and before analyst Michael Markidis from Desjardins Securities was restricted, he increased his target price to $6.50 from $6.25. In addition, Brad Sturges, the analyst from Industrial Alliance Securities, bumped his target price by 50 cents to $6.50. Matt Kornack, the analyst from National Bank Financial, increased his target price to $6.50 from $6. CIBC analyst, Dean Wilkinson, raised his target price to $6.25 from $5.75. Analyst Pammi Bir, from Scotia Capital, lifted his target price to $6.25 from $6. Frederic Blondeau, the analyst from Eight Capital, raised his target price to $6.15 from $5.75. Mark Rothschild, from Canaccord Genuity, increased his target price to $6.75 from $6.25. Jimmy Shan, from GMP, increased his target price by 50 cents to $6.25, and Neil Downey, from RBC Capital Markets, raised his target price to $6 from $5.75.
Financial forecasts
The Street is forecasting steady earnings for the Trust. The consensus funds from operations (FFO) per unit estimates are 43 cents for 2017 and 46 cents for 2018. The consensus adjusted funds from operations (AFFO) per unit estimates are 39 cents for 2017 and 41 cents for the following year.
Financial forecasts have been stable. For instance, four months ago, the FFO consensus estimates were 43 cents for 2017 and 45 for 2018, and the AFFO consensus estimates were 39 cents for 2017 and 41 cents for 2018.
Valuation
The Trust is trading at a price-to-FFO multiple of 14 times the 2017 consensus estimate, and at a price-to-AFFO multiple of 15.4 times the 2017 consensus estimate.
Target prices range from a low of $6 (at RBC Capital Markets) to a high of $6.75 (at Canaccord Genuity). The average one-year target price is $6.31, implying there is approximately 5 per cent upside potential in the unit price over the next 12 months. Individual target prices provided by nine firms are as follows in numerical order: $6, two at $6.15, three at $6.25, two at $6.50, and $6.75.
Insider transaction activities
So far in 2017, there has not been any insider transaction activity reported.
Chart watch
Year-to-date, the unit price is up 8 per cent.
The units have been in an uptrend since late 2016 and PIRET was a top performing trust in the S&P/TSX composite index real estate sector last year with the unit price rising 28 per cent.
Looking at key resistance and support levels, the unit price has initial overhead resistance around $6.20, and after that, around $6.50. There is initial downside support at $6. Failing that, there is support between $5.75 and $5.85, close to its 50-day moving average (at $5.87). There is additional support around $5.50, near its 200-day moving average (at $5.51).
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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.