Wednesday, December 7, 2011

Calloway Real Estate Investment Trust 2

I do not own this stock (TSX-CWT.UN). This is one of a few REITs and Real Estate companies that I follow. Like a lot of Real Estate companies, the company has problem raising their distributions lately. They have not increased them since 2008.

When I look at insider trading I find a bit of insider buying and some insider selling. The insider buying is at $.37M and the net buying is at $.28M. Most of the insider buying is by a Director. All the insider selling is by the CEO. Also some 78 institutions own 34% of the shares of this company. There has been some buying and selling over the past 3 months and they have marginally reduced their ownership.

Most analysts give estimates for FFO, not EPS. Looking at Price/FFO, I have a 5 year median 15.28 and a 5 year median low of 11.68. The current Price/FFO is 16.28, which suggests that the stock price is rather high. One problem I am finding with this stock is that the quarterly reports for this year do not give an EPS. Sites that do give this information do not have the same information. So this is quite confusing. The other problem with the EPS is that it tends to jump around a lot.

The lack of EPS hampers the calculation for the Graham Price. I am using the highest previous Graham Price as sites seem to imply that earnings will be up sharply this year. So with a Graham Price of $17.97, the current stock price of $26.97 is some 50% higher. This is very close to the median difference between the Graham Price and the Stock price, where the stock price is 48% higher than the Graham price.

I get a 10 year median Price/Book Value Ratio of 1.51 and a current P/B Ratio of 1.53. This ratio points to the stock price being close to a median relative price. The last thing to look at is the dividend yield. The current dividend yield is 5.74% and the 5 year median is 6.96%. Even the 9 year median low dividend yield is higher at 6.14%. This would suggest that the current stock price is relatively high. So it seems that none of my tests show this stock at a good relative price. Two show it relatively high and two show it at a relatively median price.

When I look at analyst recommendations, I find a few Strong Buy, a few Buy and lots of Hold recommendations. The consensus recommendation would be a hold. I can only find comments from analysts that feel this is a buy and they are say the same thing. They call this REIT the “Wal-Mart’ REIT, because of its strategic relationship with Wal-Mart. They think that it can only make money for its shareholders.

A Hold recommendation gives the 12 month stock price at $27.53. This is only 2% higher than the current stock price of $26.97. Another Hold recommendation gives a 12 months stock price of $28 and this is 3.8% higher than the current price. A 3.8% increase is not bad considering the dividend yield of 5.74%. This would give a Total return of 9.5%. A return of 8% or above is good for a REIT stock.

There is an interesting article about REITs by Moody’s Investment Service. This article is a bit hard to read because it is all squished up, but it is worthwhile. Another blogger Dividend Boy has also recently written about this stock.

Calloway REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Calloway. See my spreadsheet at cwt.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. Is Calloway in a cash bind?
    While for the most part occupancy rates are good, with a few exceptions,it appears that the REIT has a lot of properties "under development". The REIT is floating an additional 3.7 m. trust units into the market pegged at $27.05/unit (this is above current market) to raise money to service debt. Will there be a market dillution?

  2. I do not think that there is any particular problem. Issuing Units seems to be the way Calloway expands. There is a couple of news articles on this at G&M. See Calloway REIT Announces $100 Million Public Offering of Trust Units and see Calloway Real Estate Investment Trust Renews "At-the-Market" Equity Financing Program.

  3. Thanks for sharing the information with us..It was nice to read your post..