On today's TSX Breakouts report, there are 52 stocks on the positive breakouts list (stocks with positive price momentum), and 20 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that appears on the positive breakouts list. The unit price has been in a multi-year uptrend providing investors with an attractive total return over the years. Furthermore, the Fund offers investors an attractive yield of 4.3 per cent that appears sustainable with a payout ratio of 62 per cent for the first nine months of the year. The security I am referring to is Richards Packaging Income Fund (RPI.UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Fund
Based in Mississauga, the Fund owns Richards Packaging, North America's third largest packaging distributor. Richards Packaging specializes in servicing small and mid-sized companies offering glass and plastic container manufacturing and distribution services. Its customer base is well diversified comprised of over 14,000 companies in industries such as food and beverage, cosmetic, pharmaceutical, and healthcare.
On Oct. 26, the Fund reported its third-quarter financial results. Revenue increased 2.4 per cent to $73.5-million from $71.8-million reported during the same period last year. Excluding the foreign exchange impact, organic (or internal) revenue growth was 3.8 per cent year-over-year. EBITDA (earnings before interest, taxes, depreciation and amortization) climbed to $9.9-million from $9.5-million reported last year. Net income was $5.2-million or 36.7 cents per unit. Distributable cash flow per unit came in at 41 cents. Richards Packaging has a healthy balance sheet. Its debt-to-EBITDA ratio stood at 0.9 times at quarter-end.
In the Management's Discussion and Analysis, management indicated that it believes, "The performance of Richards Packaging is on track to meet ongoing requirements for working capital, capital expenditures and to sustain monthly distributions to Unitholders at the current level through 2017. Organic revenue growth for the third quarter was slightly ahead of our second quarter outlook at 3.8 per cent, and we expect this to reset back down to the historical 1 per cent to 3 per cent growth band for the fourth quarter in line with our outlook for GDP growth. The impact of exchange translation is expected to reduce revenue by $1.6 million for the fourth quarter at current exchange rates of U.S./Cdn. 79 cents versus U.S./Cdn. 75 cents for the same period in 2016. The sensitivity is $0.4 million for every 1 cent movement in the exchange rate." The report also quantified, "Distributable cash flow sensitivity on an annual basis to foreign currency fluctuations is $0.03 million for every U.S./Cdn. 1 cent movement."
Revenue has steadily grown over the years. To illustrate, the company reported revenue $286.96-million in 2016, $249.43-million in 2015, $212.285-million in 2014 and $198.528-million in 2013.
Distribution policy
The Fund pays unitholders a monthly distribution of 11 cents per unit, or $1.32 cents per unit yearly, equating to an annualized yield of 4.3 per cent.
For the past two years, during the month of March, the Fund has announced a distribution increase. In March 2017, management announced an 18 per cent increase raising its monthly distribution to 11 cents per unit from 9.35 cents per unit. In March 2016, management announced a 27 per cent distribution hike.
During the first nine month of 2017, the cash flow payout ratio stood at 62 per cent.
Analysts' recommendations
This small-cap security with a market capitalization of $331-million is not officially covered by analysts.
Insider transaction activities
So far in 2017, there have been no transactions in the public market reported by insiders.
Chart watch
The unit price has been in a multi-year uptrend marked by periods of positive price momentum followed by consolidation phases when the unit price trades sideways. Year-to-date, the unit price is up 25 per cent. In 2016, the unit price climbed 29 per cent. In 2015, 2014 and 2013, the unit price rallied 44 per cent, 26 per cent, and 23 per cent, respectively. These quoted returns are price returns. Total returns are higher as yields are included.
In terms of key resistance and support levels, the unit price may face resistance between $32 and $33. In terms of downside support, there is initial support around $30, which is near its 50-day moving average (at $29.77). There is additional support around $29, close to its 200-day moving average (at $28.89).
This small-cap security is thinly traded. The three-month historical daily average trading volume is approximately 13,000 units.
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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, 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.