On today’s TSX Breakouts report, there are 22 stocks on the positive breakouts list (stocks with positive price momentum), and 91 securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that appeared on the positive breakouts list in late-August. It has been a strong performer providing investors with both growth and income over the past several years. Year-to-date, the unit price has rallied 19 per cent, while offering investors stable distributions and currently yielding 5.5 per cent.
The security I am referred to is Dream Global Real Estate Investment Trust (DRG-UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Toronto-based Dream Global REIT owns and operates office, industrial, and mixed use properties located in four European countries: Germany, the Netherlands, Austria, and Belgium. As at the end of the second-quarter, the REIT held 243 properties, of which 129 are located in Germany, 112 are in the Netherlands, one property is in Vienna, Austria, and one property is located in Brussels, Belgium.
In terms of its tenant base, Deutsche Post was the REIT’s largest customer, representing 7.8 per cent of the Trust’s total annualized gross rental income as at June 30. The second largest tenant, Siemens AG, represented just 2.4 per cent of the Trust’s total gross rental income.
After the market closed on Aug. 7, Dream Global reported solid second-quarter financial results, sending the unit price up 1.6 per cent the following day. Funds from operations (FFO) per unit came in at 26.5 cents, just above the consensus estimate of 26 cents per unit, and up 26 per cent year-over-year. Occupancy was 89.7 per cent. Same-property net operating income (NOI) increased 3.7 per cent year-over-year.
On the earnings call, Alexander Sannikov, senior vice-president of commercial properties, indicated, “For 2018, we were targeting the sale of approximately EUR 100 million of noncore assets in Germany and The Netherlands. So far in 2018, we've closed or have under contract EUR 82.6 million of dispositions, and we are in advanced negotiations on additional EUR 22.6 million of sales, and have received offers on a further EUR 5.1 million of potential transactions. Based on this progress to date, we are on track to slightly exceed our sales target with respect to both German and Dutch noncore properties. Lastly, we are making progress with respect to our redevelopment properties.”
On June 26, management announced that it completed a $201.5-million equity offering, issuing 13.8-million units at a price of $14.60 per unit with proceeds earmarked to fund acquisitions. Proceeds from the financing are expected to be fully deployed by the end of the third-quarter.
Dream Global REIT pays its unitholders a monthly distribution of 6.667 cents per unit, or 80 cents per unit yearly, equating to an annualized yield of 5.5 per cent. Management has maintained the distribution at this level since 2011.
There are nine analysts who have issued recent recommendations on the REIT, of which seven analysts have buy calls and two analysts have hold or neutral recommendations.
The nine analysts are from the following firms in alphabetical order: Baader Helvea, Canaccord Genuity, Desjardins Securities, Echelon Wealth Partners, GMP Securities, National Bank Financial, RBC Capital Markets, Scotia Capital and TD Securities.
In August, two analysts tweaked their target prices higher.
Pammi Bir, the analyst from Scotia Capital, increased his target price to $15 from $14.75. GMP Securities analyst Himanschu Gupta’s target price increased to $15 from $14.75 as well.
The Street is forecasting FFO per unit of $1.04 for 2018, rising to $1.07 in 2019. The consensus adjusted funds from operations (AFFO) per unit estimate are 91 cents in 2018 and 97 cents the following year.
Earnings expectations have been relatively stable. For instance, three months ago, the consensus FFO per unit estimates were $1.05 for 2018 and $1.08 for 2019. The Street was anticipating AFFO per unit of 92 cents for 2018 and 97 cents for 2019.
The REIT is trading near peak historical levels. According to Bloomberg, units of Dream Global are trading at a price-to-AFFO multiple of 14.9 times the 2019 consensus estimate.
The average one-year target price is $15.59, suggesting the unit price has over 7 per cent upside potential. Including the distribution, this equated to a potential total return of 13 per cent. Individual target prices provided by eight firms are as follows in numerical order: $14.50, two at $14.75, three at $15, $15.31, and $16.
Insider transaction activity
Year-to-date, there have only been two transactions reported in the public market.
Most recently, on July 17, Detlef Bierbaum, who sits on the board of trustees, exercised his rights and sold the corresponding number of units (1,766) at an average price per unit of $14.31, leaving 86,147 units in his account.
On Feb. 28, president and chief executive officer Jane Gavan exercised her rights, receiving 14,203 units, and divested 7,702 units at an average price per unit of $12.3817, with 22,709 units remaining in her portfolio.
The unit price has experienced a stellar move, rallying from the $9 level in early 2017 to a record closing high of $15 on June 4, 2018. Year-to-date, the unit price is up nearly 19 per cent. However, in recent months, this positive price momentum has stalled as the REIT digests these gains.
Looking at key resistance and support levels, the unit price is approaching initial overhead resistance around $15. Looking at the downside, there is initial technical support around $14. Failing that, the stock has strong technical support around $13.50, which is close to its 200-day moving average (at $13.40).
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.