Smart REIT 2

On my other blog I am today writing the second part of Starting Out Investing continue...

Sound bite for Twitter and StockTwits is: Stock price is cheap to reasonable. The stock is only cheap when viewing it via the P/B Ratio. Other testing shows that the stock price is relatively reasonable and above the relative median. See my spreadsheet on Smart REIT.

I do not own this stock of Smart REIT (TSX-SRU.UN, OTC-CWYUF). Once you have 5 or 6 stocks, you might want to consider a REIT for diversification. REITs are an easy way to investment in real estate. I am therefore following a few REIT stocks and in 2009 I decided to look at a few on the Dividend Achiever's List. Unfortunately, this stock is no longer on the Dividend Achiever's List.

This stock recently changed its name from Calloway Real Estate Income Trust (TSX-CWT.UN) to Smart REIT (SRU.UN). The OTC symbol seems to still be CWYUF.

When I look at insider trading, I find no insider selling and no insider buying. In 2014 the outstanding shares were increased by 481,000 shares or by 0.35%. The book value of these shares was $12.4M and this number of shares was worth 13.1M at the end of 2014.

The chairman of this company has trust units worth around $400M; Limited Partnership Units worth around $1,307M and Special Voting Units worth around $731.8M. What he owns is around 61.6% of the market cap.

I get 5 year low, median and high median Price/Earnings per Share Ratios of 12.59, 13.56 and 14.54. The 10 year P/E Ratios are a lot higher at 23.54, 27.90 and 35.42. This is because of the large variation between P/E Ratios year over year. This current P/E Ratio is 13.94 based on a stock price of $29.13 and 2015 EPS estimate of $2.09. Because of the big variation in P/E Ratios I do not think this is good measurement for this company. For example, the P/E on closing price was 213.74 in 2010 and was 4.09 in 2012.

A better measure might be Price/Funds from Operations Ratios. The 5 year low, median and high median P/FFO Ratios are 13.42, 14.73 and 16.34. The corresponding 10 year values are 12.76, 14.69 and 16.24. The current P/FFO Ratio is 14.89 based on FFO estimates for 2015 of $2.05 and a stock price of $29.13. This stock price testing suggests that the stock price is relatively reasonable and just north of the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.47. The current P/B Ratio is 1.09 based on a stock price of $29.13 and BVPS of $26.61. The current P/B Ratio is some 26% below the 10 year median P/B Ratio. This stock price testing suggests that the stock price is relatively cheap.

The 5 year median dividend yield is 5.93% and the current dividend yield is 5.50% which is some 7.3% lower. The current dividend yield is based on dividends of $1.60 and a stock price of $29.13. This stock price testing suggests that the stock price is relatively reasonable, but above the relative median.

If you look at the historical median dividend yields of 6.17%, the current dividend yield of 5.50% is 10.9% lower. Again, this stock price testing suggests that the stock price is relatively reasonable, but above the relative median. There is, of course, a problem with looking at dividend yields for testing because dividends have been flat 2008 and 2014 some 6 years.

If you look at P/CF Ratios, the 10 year median is 15.92 and the current one would be 16.55 based on CF of $239.4M based on the cash flow for the 12 months to the end of the second quarter. The current P/CF is some 3.9% higher than the 10 year median P/CF Ratio. This stock price testing suggests that the stock price is relatively reasonable, but above the relative median.

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendations would be a Buy. The 12 months stock price consensus is $33.20. This implies a total return of 19.47% with 5.50% from dividends and 13.97% from capital gains.

In this Motley Fool article by Joseph Solitro, he says that this REIT is of good quality. This Stockhouse article talks about Calloway REIT acquiring Smart Centres platform from Mitchell Goldhar. Mitchell Goldhar is the chairman of Smart REIT.

This is the second of two parts. The first part was posted on Tuesday, September 22, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

Smart REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Smart REIT.

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.

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