On today's TSX Breakouts report, there are 48 stocks on the positive breakouts list (stocks with positive price momentum), and five securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that appears on the negative breakouts list, trading at the lower end of its historical trading range. The security offers investors a stable distribution equating to a 5.7 per cent yield. The security I am referring to is Choice Properties Real Estate Investment Trust (CHP.UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Toronto-based Choice Properties REIT owns, manages, and operates 546 properties across the country, anchored principally by Loblaw stores. As at Sept. 30, Loblaw accounted for roughly 88 per cent of annual base rent.
After the market closed on Nov. 7, Choice Properties reported third-quarter financial results that were in-line with expectations. FFO per unit came in at 26 cents, in-line with the consensus estimate and up 6 per cent year-over-year. Occupancy was 98.9 per cent. Same-property net operating income increased 3.6 per cent year-over-year.
On the earnings call, management indicated that acquisition activity would accelerate in 2018. The Chief Financial Officer Bart Munn stated, "From an acquisition point of view, I think we probably will be bit light on the 2017. We'll be between $50-million and $75-million. That's probably where we'll land. It's just timing, and we expect to see, the acquisitions in 2018 to move up in the first half of the year."
The REIT pays its unitholders a monthly distribution of 6.1667 cents per unit, or 74 cents per unit yearly. This equates to an annualized yield of 5.7 per cent.
The distribution appears sustainable with room to expand. The FFO payout ratio was 69 per cent for the first nine months of 2017.
Since November, nine analysts have issued research reports on the REIT. All nine have hold recommendations.
The nine firms with recent research coverage on the REIT are as follows in alphabetical order: BMO Capital Markets, CIBC World Markets, Desjardins Securities, GMP, National Bank Financial, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
In November, Jimmy Shan, the analyst at GMP, trimmed his target price to $13.65 (the low on the Street) from $14.25. Sumayya Hussain from CIBC World Markets reduced her target price to $14.50 from $15.
The Street is forecasting FFO per unit of $1.05 for 2017, $1.09 for 2018 and increasing to $1.11 in 2019. The consensus adjusted FFO per unit estimates are 87 cents in 2017, 90 cents in 2018, and 94 cents in 2019.
Forecasts have been relatively stable. For instance, six months ago, the Street was forecasting FFO per unit of $1.05 for 2017 and $1.08 for 2018. The consensus AFFO per unit estimates were 87 cents for 2017 and 89 cents for 2018.
The REIT is trading at a price-to-AFFO multiple of 14.5 times the 2018 consensus estimate.
The consensus target price is $14.52, suggesting there is 11 per cent upside potential in the unit price over the next 12 months. Including the yield, this represents a potential total return of 17 per cent over the next year. Individual target prices provided by eight firms are as follows in numerical order: $13.65, $14, three at $14.50, and three at $15. The majority of target prices are $14.50 or higher.
Insider transaction activities
On Dec. 13, Dallas Wingerak, Vice-President of Real Estate and Operations, exercised her options and sold the corresponding number of units (5,194) at an average price per unit of $13.241. In November, she exercised her options, receiving 20,800 units, all of which she sold. Her remaining portfolio balance stood at 7,452 units as at Dec. 13.
Since the spring of 2016, the unit price has been consolidating, trading sideways, largely between $13 and $14.30. The unit price is currently trading at the lower end of this trading band. In recent months, the unit price has been drifting lower but not on significant volume for the most part. The REIT can be thinly traded. The three-month historical daily average trading volume is approximately 72,000 units.
Looking at key overhead downside support and overhead resistance levels, there is initial downside support between $12.80 and $13. Failing that, there is support around $12.50, and then at $12. Looking at the upside, there is initial overhead resistance around $13.50, near its 200-day moving average (at $13.54). After that, the unit price faces significant resistance between $14 and $14.30.
The relative strength index is at 39, suggesting the unit price is nearing oversold territory. Generally, a RSI reading at or below 30 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, 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.