Tuesday, March 10, 2015

Canadian Real Estate Investment Trust 2

Sound bite for Twitter and StockTwits is: Stock price maybe expensive. Stock price is reasonable using FFO and AFFO. However, the stock price based on measures like revenue and cash flow is currently expensive. The P/CF at 18.90 and P/S at 7.31 are a bit high. This dividend yield of 3.90% is not far off with other REITs, most of which have yields currently in the 4 to 5% range. However, the 3.90% is at historical low. See my spreadsheet at ref.htm.

I own this stock of Canadian Real Estate Investment Trust (TSX-REF.UN, OTC-CRXIF). I started to follow some REITs because I wanted to diversify my portfolio into REITs. I was mainly interested in that have commercial properties. In September 2006, I wanted to buy another REIT after having to sell Summit. I already have lots of RioCan.

The company says that it buys shares on the open market for stock options. There are also seems to be few people with stock options. I looked at the CEO, CFO, an officer, a director and the chairman. Only the officer had any stock options and he did not have many.

When I look at insider trading, I found $2.3M of insider buying and a little insider selling. Net insider buying was at $2.3M. This report covers the past year. Most of the insider buying occurred one year ago, but there have been some 4 instances of insider buying since then. All buying was by directors of the company.

For REITs, it makes more sense to look at Price/Funds from Operations and Price/Adjusted Funds from Operations Ratios. In both cases the current P/FFO and P/AFFO Ratios are lower than the corresponding 5 year median.

For P/FFO Ratio, the current one is 14.81 based on FFO 2015 estimate of $3.03 and a stock price of $44.86. It is 2.9% lower than the 5 year median of 15.25. For P/AFFO Ratio, the current one is 16.14 based on AFFO 2015 estimate of $2.78 and a stock price of $44.86. It is 0.2% lower than the 5 year median of 16.92. This stock price testing suggests that the stock price is reasonable.

If you look at the Price/Cash Flow Ratio, the 10 year medina ratio is 15.25. The 5 year median is close at 15.54. The current P/CF Ratio using the last 12 months CFPS value is 18.90 a value some 24% higher. This stock price testing suggests that the stock price is high.

If you look at P/S Ratio, the 10 year median ratio is 6.22. The current one is 7.43 based on 2015 Revenue estimate of $438Mand a current stock price of $44.86. The current value is some 19% higher than the 10 year median. The P/S Ratio has been steadily rising and the 5 year median value is higher at 7.31 and this is close to the current P/S Ratio. This stock price testing suggests that the stock price is reasonable to expensive.

For this company, the dividend yield used to be a lot higher. This 10 year median before 2004 was 9.22%. Currently the 10 year median is 4.48%. The historical average and median are 7.41% and 6.76%. The current dividend yield at 3.90% is a lot lower. The 3.90% dividend yield is based on dividends of $1.75 and a stock price of $44.86. The current dividend is 3% higher than the 5 year median of 3.79% and only 13% off the 10 year median value of 4.48%. If you use just the 5 or 10 year median, the stock price comes in as reasonable.

However the historical dividend low for this company is 3.93%. At 3.90% the current dividend is around the historical low. This would imply that the stock price is expensive.

The analysts' recommendations are Strong Buy, Buy and Hold. The consensus would be a Buy. The 12 month stock price consensus is $51.10. This implies a total return of 17.81% with 3.90% from dividends and 13.91% from capital gains.

Through Market Wired this company announced their fourth quarter results for 2014. This company has been downgraded by Scotiabank to a sector preform (Hold) rating according to WKRB. The CIBC talks about why you should have REITs in your portfolio, including this company.

This is the second of two parts. The first part was posted on Monday, March 09, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. Its web site is here CDN Real Estate.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

1 comment:

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