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On today’s TSX Breakouts report, there are 10 stocks on the positive breakouts list (stocks with positive price momentum), and 92 stocks are on the negative breakouts list (stocks with negative price momentum).

Discussed today is a security that appears on the positive breakouts list with its unit price rising 29 per cent year-to-date, in addition to a 15 per cent gain last year. In addition to price appreciation, it provides investors with an attractive yield of 5.4 per cent and paid its unitholders a special distribution earlier this year. This month, six analysts revised their target prices – all higher. The security highlighted today is Summit Industrial Income Real Estate Investment Trust (SMU.UN-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The REIT

Brampton, Ont.-based Summit holds a portfolio of 92 properties across the country: 59 in Ontario, 22 in Quebec, eight in Alberta, two in B.C. and one in New Brunswick. Management remains focused on expanding in the Greater Toronto and Greater Montreal regions due to the strong industry fundamentals in these markets. These two markets represent 81 per cent of Summit’s total portfolio [62 per cent in the Greater Toronto Area and 19 per cent in the Greater Montreal Area]. The REIT’s top 10 tenants account for 30 per cent of total base rent.

After the market closed on Nov. 6, Summit reported third-quarter financial results that were relatively in-line with expectations. Funds from operations [FFO] per unit came in at 14 cents, matching the Street’s expectations. Same-property NOI [net operating income] was relatively unchanged year-over-year (up 0.4 per cent). Occupancy was 98 per cent at quarter end with an average lease term of 6 years and annual rent escalations of 1.6 per cent. In 2019, 6 per cent of the portfolio’s leases mature, rising to 10.2 per cent in 2020 and 7.5 per cent in 2021. The unit price was relatively unchanged the following day, declining by a penny.

Acquisition growth is a key objective held by management. Year-to-date, Summit has purchased eight properties at a 5.45 per cent average cap rate. To fund its acquisitions, the REIT completed equity offerings in June and in Dec. 2017. At quarter end, the REIT’s leverage ratio stood at 44.4 per cent.

On the earnings call, chief financial officer Ross Drake indicated that the REIT has $210-million in acquisition capacity if the leverage ratio increased to its 50 per cent target.

Chief executive officer Paul Dykeman stated on the call, “We also expect to continue the pace of our accelerated portfolio growth, financed by a recent equity offering and also the recycling of our capital generated from our main property sales. Our pipeline of potential acquisitions remains very strong. We’re evaluating a number of new opportunities that will add to our cash flows in the coming quarters.” He added, “The pipeline is probably as full as we’ve seen it in the last at least couple of years.”

Management’s ownership position stands at 7 per cent.

Distribution policy

Summit pays its unitholders a monthly distribution of 4.3 cents per unit or over 51 cents per unit annually. This equates to a current yield of 5.4 per cent. In May, the REIT paid its unitholders a special distribution of 1.8 cents per unit as a result of a gain realized from the sale of four properties.

Analysts’ recommendations

This small-cap REIT, with a market capitalization of $761-million, is well covered by the Street. There are eight analysts following the REIT, of which five analysts have buy recommendations and three analysts have hold recommendations.

The firms providing research coverage on Summit are as follows in alphabetical order: BMO Capital Markets, Canaccord Genuity, CIBC Capital Markets, Desjardins Securities, Echelon Wealth Partners, Industrial Alliance Securities, National Bank Financial and RBC Capital Markets.

Revised recommendations

In recent weeks, six analysts have revised their target prices – all higher.

This week, Matt Kornack, the analyst from National Bank Financial, increased his target price to $10 from $9.

Earlier in the month, Michael Markidis from Desjardins Securities lifted his target price by 50 cents to $9.50. Troy Maclean from BMO Capital Markets raised his target price to $10 from $9.50. Matt Logan from RBC Capital Markets bumped his target price to $9.50 from $9. Chris Couprie from CIBC Capital Markets hiked his target price to $9.75 from $9.25. Stephane Boire from Echelon Wealth Partners took his target price up to $9.75 from $9.

Financial Forecasts

The consensus FFO per unit estimates are 57 cents in 2018, rising to 62 cents in 2019. The adjusted funds from operations (AFFO) per unit consensus estimates are 50 cents in 2018 and 56 cents in 2019.

The Street’s forecasts have been stable. Looking three months back, the FFO consensus estimates for this year and next year have not changed.

Valuation

The REIT’s multiple has been expanding. The REIT is now trading at a price-to-FFO multiple of 15.3 times the 2019 consensus estimate.

The average one-year target price is $9.82, implying the unit price may appreciate nearly 4 per cent over the next 12 months. Including the yield, this translates into a potential total return of over 9 per cent. Individual target prices are quite concentrated, ranging from a low of $9.50 to a high of $10. Individual target prices are as follows in numerical order: two at $9.50, two at $9.75 and four at $10.

Insider transaction activity

Most recently, on Sept. 21, Larry Morassutti, who sits on the board of trustees, purchased 15,000 units at a price per unit of $8.75 for an account in which he has indirect ownership (Travi Inc.). This account currently holds over 3-million units.

Chart watch

The unit price has been in an uptrend since the beginning of 2017. Year-to-date, the unit price has rallied 29 per cent. In 2017, the unit price increased 15 per cent. On Tues., the unit price increased over 2 per cent on very high volume. Over 1.1-million units traded, well above the three-month historical daily average trading volume of approximately 400,000 units.

Looking at key resistance and support levels, the unit price is approaching an initial ceiling of resistance around $10. After that, the next major overhead resistance level is around $10.50. Looking at the downside, there is strong technical support around $9, close to its 50-day moving average (at $9.07). Failing that, there is technical support around $8.50, near its 200-day moving average (at $8.67).

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.

Positive Breakouts Nov. 27 close
AAAA-T Auralite Investments Inc. $4.00
BCE-T BCE Inc $57.01
BAM.A-T Brookfield Asset Management Inc $58.76
FN-T First National Financial Corp $29.40
JE-T Just Energy Group Inc $5.48
L-T Loblaw Cos Ltd $61.13
MRU-T Metro Inc $45.55
MNW-T Mitel Networks Corp $14.74
RCI.B-T Rogers Communications Inc $71.03
SMU-UN-T Summit Industrial Income REIT $9.47
Negative Breakouts
ADN-T Acadian Timber Corp $15.40
AAV-T Advantage Oil & Gas Ltd $2.65
AGF/B-T AGF Management Ltd $4.91
BOS-T AirBoss of America Corp $8.00
AGI-T Alamos Gold Inc $4.24
CLIQ-T Alcanna Inc. $7.15
USA-T Americas Silver Corp $1.76
ARX-T ARC Resources Ltd $9.28
AR-T Argonaut Gold Inc $1.21
ATH-T Athabasca Oil Corp $1.00
ACB-T Aurora Cannabis Inc. $7.29
BIR-T Birchcliff Energy Ltd $3.55
BDI-T Black Diamond Group Ltd $2.21
BEI-UN-T Boardwalk Real Estate Investment Trust $41.24
BNE-T Bonterra Energy Corp $8.39
DOO-T BRP Inc $41.42
BTB-UN-T BTB Real Estate Investment Trust $4.51
CFW-T Calfrac Well Services Ltd $2.99
CNQ-T Canadian Natural Resources Ltd $32.64
CJ-T Cardinal Energy Ltd $2.65
KBLT-T Cobalt 27 Capital Corp. $4.78
CMG-T Computer Modelling Group Ltd $6.36
CMMC-T Copper Mountain Mining Corp $0.86
CPG-T Crescent Point Energy Corp $4.25
CR-T Crew Energy Inc $1.15
ELD-T Eldorado Gold Corp $0.75
ECA-T Encana Corp $9.14
ENGH-T Enghouse Systems Ltd $67.80
ESI-T Ensign Energy Services Inc $4.70
FSZ-T Fiera Capital Corp $11.36
FR-T First Majestic Silver Corp $6.35
FVI-T Fortuna Silver Mines Inc $4.25
FRU-T Freehold Royalties Ltd $8.61
FEC-T Frontera Energy Corp. $13.51
GLXY-T Galaxy Digital Holdings Ltd. $0.90
GXE-T Gear Energy Ltd $0.56
GSV-T Gold Standard Ventures Corp. $1.48
GTE-T Gran Tierra Energy Inc $3.31
GUY-T Guyana Goldfields Inc $1.29
HNL-T Horizon North Logistics Inc $2.19
HYG-T Hydrogenics Corp $6.81
KEL-T Kelt Exploration Ltd $4.43
KML-T Kinder Morgan $15.56
LB-T Laurentian Bank of Canada $40.41
LGT/B-T Logistec Corp $48.75
LUC-T Lucara Diamond Corp $1.83
MAL-T Magellan Aerospace Corp $16.09
MEQ-T Mainstreet Equity Corp $44.71
MFI-T Maple Leaf Foods Inc $28.37
MRD-T Melcor Developments Ltd $12.93
MX-T Methanex Corp $73.89
MSI-T Morneau Shepell Inc $26.44
MPVD-T Mountain Province Diamonds Inc $1.57
MTL-T Mullen Group Ltd $12.21
NWH-UN-T NorthWest Healthcare Properties REIT $10.46
NVA-T NuVista Energy Ltd $3.90
OBE-T Obsidian Energy Ltd. $0.63
PONY-T Painted Pony Energy Ltd $1.81
PAAS-T Pan American Silver Corp $16.68
POU-T Paramount Resources Ltd $7.33
PGF-T Pengrowth Energy Corp $0.70
PL-T Pinnacle Renewable Holdings Inc. $12.47
POW-T Power Corp of Canada $26.21
PWF-T Power Financial Corp $27.73
PSK-T PrairieSky Royalty Ltd $17.88
PG-T Premier Gold Mines Ltd $1.46
QTRH-T Quarterhill Inc. $1.39
REAL-T Real Matters $3.01
RET.A-T Reitmans Canada Ltd $3.49
RME-T Rocky Mountain Dealerships Inc $9.16
RUS-T Russel Metals Inc $22.73
SES-T Secure Energy Services Inc $7.44
VII-T Seven Generations Energy Ltd $10.03
SCL-T ShawCor Ltd $18.97
S-T Sherritt International Corp $0.45
ZZZ-T Sleep Country Canada $20.85
RAY.A-T Stingray Digital Group Inc. $7.39
SRX-T Storm Resources Ltd. $2.00
SPB-T Superior Plus Corp $10.16
SGY-T Surge Energy Inc $1.56
TKO-T Taseko Mines Ltd $0.80
TGZ-T Teranga Gold Corp $3.21
X-T TMX Group Ltd $74.24
TIH-T Toromont Industries Ltd $56.96
TOT-T Total Energy Services Inc $9.24
TOU-T Tourmaline Oil Corp $18.40
TGL-T TransGlobe Energy Corp $2.68
TCW-T Trican Well Service Ltd $1.24
WJX-T Wajax Corp $18.32
WTE-T Westshore Terminals Investment Corp $23.80
WCP-T Whitecap Resources Inc $4.82
YGR-T Yangarra Resources Ltd. $2.66

Source: Bloomberg

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