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analysis

On today’s Breakouts report, there are 21 securities on the positive breakouts list (stocks with positive price momentum), and 51 stocks are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a high-yielding security in the S&P/TSX SmallCap Index that surfaced on the positive breakouts list – Bridgemarq Real Estate Services (BRE-T).

A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.

The company

Toronto-based Bridgemarq is a provider of real estate services offered through three main banners: Royal LePage, Quebec-based Via Capitale, and Ontario-based Johnston & Daniel. As of Sept. 30, the company had a network of 18,930 realtors (approximately 18,000 agents work at Royal LePage) of which approximately 60 per cent are located in Ontario.

In May 2019, the company began trading under its new name Bridgemarq Real Estate Services Inc. and was previously known as Brookfield Real Estate Services Inc. The ticker remained the same, BRE.

According to Bloomberg, major institutional shareholders include 1832 Asset Management L.P (owned by The Bank of Nova Scotia), and Fiera Capital Corp., each with ownership positions exceeding 10 per cent.

Quarterly earnings

Before the market opened on Nov. 6, the company reported its third-quarter financial results.

Revenue was $10.7-million, down from $11.7-million reported during the same period last year. In April 2020, the company implemented a Pandemic Fee Relief Plan under which fixed franchise fees were suspended for roughly 82 per cent of the company’s network of realtors and the variable fee was raised but capped once a limit for the year was reached. Consequently, revenue is anticipated to be down year-over-year in the fourth quarter as well. Distributable cash flow was down coming in at $4.2-million compared to $4.8-million reported last year. The share price was relatively flat that day, down 15 cents or 1 per cent.

On the earnings call, president of residential franchise and core brokerage services Phil Soper was cautiously optimistic, stating, “The fundamentals driving our business are strong and we remain positive about the medium-term outlook for the company, but it is important to note that the uncertainty and the duration and the magnitude of the pandemic.”

He added, “Canada’s housing market recovery during the quarter exceeded expectations, it really was nothing short of remarkable. The surge in buyer demand marked the end of the second quarter [and] extended right through the three months in the last quarter, resulting in record-breaking quarterly sales as well as significant price appreciation.”

Transactional dollar volume increased 63 per cent year-over-year to $109-billion.

The company will be reporting its fourth-quarter earnings results before market opens on March 5 and hosting a conference call that day at 10 a.m. E.T.

Investment thesis highlights

  • Market leadership. Based on 2019 transactional dollar volume, Bridgemarq has captured roughly 20 per cent of the residential real estate market in Canada.
  • Cash flow stability. Bridgemarq has long-term franchise agreements with terms ranging from 10 to 20 years and a typical renewal term of 10 years. Roughly 73 per cent of franchise fees are fixed, providing predictable recurring revenue. Royal LePage franchise agreements accounts for 95 per cent of the company’s realtors.
  • Strong real estate market. To illustrate, on the third-quarter earnings call, the chief financial officer Glen McMillan indicated that unit sales in the Greater Toronto Area increased 37 per cent with average selling prices rising 13 per cent year-over-year. Montréal experienced a 43 per cent increase in unit sales and a 24 per cent spike in average selling prices.
  • Attractive yield of nearly 9%. The monthly dividend has been maintained throughout the coronavirus pandemic.

Dividend policy

The company pays its shareholders a monthly dividend of 11.25 cents per share, or $1.35 per share on a yearly basis, equating to a current annualized yield of 8.7 per cent. The company has maintained the dividend at this level since 2017.

On the earnings call, Mr. Soper said, “Based on the underlying strength of our operations and the Canadian real estate industry itself, the company has continued to maintain its dividend payments to shareholders despite the uncertainty created by the pandemic. The strength of the real estate market in the third quarter supported disposition. The company has benefited from the support of its largest investor, which has agreed to allow the company to defer payment of its management fees and interest on exchangeable units to support these dividend payments and the company overall and its liquidity.”

Analysts’ recommendations

This micro-cap stock in the S&P/TSX SmallCap Index with a market capitalization of $147-million is not covered by any analysts.

Financial forecasts

The stock is not covered by any analysts.

Insider transactions

Over the past year, there has not been any trading activity in the public market reported by insiders.

Chart watch

Year-to-date, the share price is up 4 per cent. The share price has been relatively stable during the market volatility experienced in February. So far this year, the closing share price has ranged from a low of $14.60 to a high of $15.45.

The share price has an initial ceiling of resistance around $16. After that, there is resistance between $17.50 and $18, and then around $20. The stock’s record closing high is $19.93 reached in Aug. 2018. Looking at the downside, there is initial technical support around $15, near its 50-day moving average (at $14.96). Failing that, there is strong technical support around $14.

The stock is thinly traded. The three-month historical daily average trading volume is approximately 16,000 shares.

Monday's TSX breakouts

POSITIVE BREAKOUTSFeb. 26 close
VNP-T5N Plus Inc $4.72
ARE-TAecon Group Inc $18.40
AIF-TAltus Group Ltd $55.82
BRE-TBridgemarq Real Estate Services $15.45
CWB-TCanadian Western Bank $33.45
CFX-TCanfor Pulp Products Inc $10.20
CCL-B-TCCL Industries Inc $67.03
EFX-TEnerflex Ltd $8.74
FTT-TFinning International Inc $33.21
GWO-TGreat-West Lifeco Inc $32.57
HWO-THigh Arctic Energy Services Inc $1.51
HLF-THigh Liner Foods Inc $13.26
MKP-TMCAN Mortgage Corp $17.05
MSI-TMorneau Shepell Inc $32.71
NVA-TNuVista Energy Ltd $1.98
PSI-TPason Systems Inc $9.70
STN-TStantec Inc $50.07
TBL-TTaiga Building Products Ltd. $3.30
TH-TTheratechnologies Inc $4.09
UNS-TUni-Select Inc $10.50
VB-TVersaBank $16.07
NEGATIVE BREAKOUTS
AEM-TAgnico Eagle Mines Ltd $71.04
AGI-TAlamos Gold Inc $9.02
AQN-TAlgonquin Power & Utilities Corp $19.71
AR-TArgonaut Gold Inc $2.05
ORA-TAura Minerals Inc. $11.97
BTO-TB2Gold Corp $5.54
ABX-TBarrick Gold Corp $23.75
BSX-TBelo Sun Mining Corp $0.71
CXB-TCalibre Mining Corp. $1.54
CNE-TCanacol Energy Ltd $3.44
CU-TCanadian Utilities Ltd $30.12
CPX-TCapital Power Corp $34.31
CG-TCenterra Gold Inc $12.35
KOR-TCorvus Gold Inc. $2.43
DPM-TDundee Precious Metals Inc $7.91
ELD-TEldorado Gold Corp $13.33
EDV-TEndeavour Mining Corp. $24.51
EQX-TEquinox Gold Corp. $10.54
FTS-TFortis Inc $49.00
FNV-TFranco-Nevada Corp $136.26
MIC-TGenworth MI Canada Inc $43.27
GSC-TGolden Star Resources Ltd. $3.96
GCM-TGran Colombia Gold Corp. $5.65
IMG-TIAMGOLD Corp $3.77
INE-TInnergex Renewable Energy Inc $24.08
KRR-TKarora Resources Inc. $2.93
K-TKinross Gold Corp $7.91
KL-TKirkland Lake Gold Inc $41.62
GUD-TKnight Therapeutics Inc $5.16
MOZ-TMarathon Gold Corporation $2.60
LEAF-TMedReleaf Corp. $0.38
NGT-TNewmont Corp. $69.52
NPI-TNorthland Power Inc $42.25
NG-TNovagold Resources Inc $10.68
OGC-TOceanaGold Corp $1.84
OLA-TOrla Mining Ltd. $4.39
OR-TOsisko Gold Royalties Ltd $12.70
OSK-TOsisko Mining Inc. $2.81
PVG-TPretium Resources Inc $12.38
PRMW-TPrimo Water Corp. $18.21
REAL-TReal Matters $16.00
SBB-TSabina Gold & Silver Corp $2.17
SSL-TSandstorm Gold Ltd $7.68
SEA-TSeabridge Gold Inc $21.72
SMT-TSierra Metals Inc $3.35
SIL-TSilverCrest Metals Inc. $10.59
SSRM-TSSR Mining Inc. $18.07
X-TTMX Group Ltd $121.49
WPM-TWheaton Precious Metals Corp. $45.52
WSP-TWSP Global Inc $110.22
YRI-TYamana Gold Inc $5.06

Source: Bloomberg

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.

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