Tuesday, December 10, 2013

First Capital Realty 2

I do not own this stock of First Capital Realty (TSX-FCR, OTC- FCRGF). Last year a reader asked me to review this real estate stock. Also, the site Canadian Dividend Stock site mentions this company as a top Canadian REIT.

Over the past year in insider trading, there has been $04M of insider buying and $2.3M of insider selling for a net of insider selling of $1.9M. Most of the selling was earlier in the year at $18 to $19 and the buying was in the last few months at $17. There is insider ownership. For example the CEO has shares worth $20.2M and the CFO has shares worth $16.4. Insiders not only have options, but also Units Restricted Share Units, Deferred Share Units and Warrants.

I cannot make any sense out of the P/E ratios. For example, the 5 year median P/E Ratio is 40.03 a value that is ridiculous for a REIT. The 5 year low, median and high P/AFFO Ratios are 15.44, 16.87 and 18.31. The current P/AFFO Ratio is 19.52 based on a stock price of $17.57 and 2013 AFFO estimate of $.90. Since the AFFO to the end of Quarter 3 is $.89, it is probably reasonable.

The 5 year low, median and high P/FFO Ratios are 13.71, 14.98 and 16.26. The current P/FFO Ratio is 17.06 based on a stock price of $17.57 and 2013 FFO estimate of $1.03. Since the FFO to the end of Quarter 3 is $1.07, it is probably reasonable. Both P/FFO and P/AFFO shows that the current price is high.

Using a Graham Price that has FFO rather than EPS, I get a Graham Price of $19.28. The 10 year low, median and high median P/GP Ratios are 0.89, 0.97 and 1.11. The current P/GP is .91. This stock test shows that the current price is reasonable.

If you look at cash flows, the 5 year low, median and high median P/CF Ratios are 13.25, 14.49 and 15.72. The current P/CF Ratios is 18.92. This stock price test says that the stock price is high.

I get a 5 year median dividend yield of 5.45% and the current dividend yield at 4.78% is some 13% lower. This stock test suggests that the stock price is getting rather high. If you use historical dividend yields, the median dividend yield is even high at 7.02% and that is some 31% higher than the current dividend yield.

The blogger Dividend Blogger talks in August of this year about a number of REITs and Real Estate companies.

If you look at analysts' recommendations, there are Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month consensus stock price is $19.80. This implies total returns of 17.47% with 12.69% from capital gains and 4.78% from dividends. My current price is $17.57.

I think that this stock is relatively overpriced. This is no surprising to me. The stock price has been increasing faster than revenue, FFO, AFFO, dividends and cash flow over the past 5 years. The capital gains on this stock over the past 5 years to the end of 2012 are 4.62% per year. Over this period dividends increased by 1.02% per year, FFO by 0% per year, AFFO by 0.9% per year. The revenue per share is down by 1.2% per year and cash flow per share is down by 2.8% per year.

In my experience with dividend paying stocks, the capital gains over the longer term match dividend increases. Even if you do not see things that way, the stock price cannot continue to increase faster than every other measurement of growth. Yes, I know that some of these measurements are estimated to increase this year, but if you look at 5 year growth using 2013 estimates, there still is not much in the way of growth, except again for stock capital gains. See my spreadsheet at fcr.htm.

This is the second of two parts. The first part was posted on Monday, December 9, 2013 and is available here.

First Capital Realty is Canada's leading owner, developer and operator of supermarket and drugstore anchored neighbourhood and community shopping centers, located predominantly in growing metropolitan areas. Its web site is here First Capital Realty.

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 or StockTwits.

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