Cominar REIT has a solid first quarter
A new company that I am following closely is called Cominar REIT.On May7,2015 it released it's first quarter results.I,myself, am investing in this REIT because it owns property in largely Quebec and in particular the Montreal area and so can get some properties with potential.Real estate has been depressed here for a few years and so prices are a bargain.Also rents are a little low and leave room to be increased.In addition, Cominar pays a good dividend and the dividend is pretty safe.I like REITs that have good growth in revenues and earnings and Cominar fits the bill here.It's occupancy rate remains high. It trades in a tight range around $17 to $20 and now is in the middle of the range.As revenues and earnings grow it should head towards $19 and eventually $20 again.For example,Cominar tells us that it has bought 3 industrial properties since the end of the first quarter with a reasonable capitalization rate. This blog estimates that interest rates will not likely rise until at least September and maybe only in December.Any interest rate rise should not be too stiff as eceonomic growth is still fragile.A small interest rate increase should not rock it excessively but it will not allow it to climb beyond $20.So investors should be looking for a small but steady increase until 2016 and a steady dividend.
Growth in Revenues and Earnings
Cominar reports in it's press release that operating revenues increased by 31 % from Q1 2014;they went from $174 million to $229 million.While net operating income increased to $119 million for a 31% increase.Cominar has had increases in revenue each quarter for the last four quarters.Together with the three new acquisitions there should be revenue increases for the next quarter also.At a capitalization rate of 8.1% the expected income stream will be $365,000 a year so this should produce additional income and additional revenue of at least $2 to $3 million here.
The rest of the year
Cominar now has total assets of $8.2 billion and has reduced it'sdebt ratio(excluding convertible debentures) to 52%.It is a sizeable REIT and is showing good growth in both revenues and income.It just completed an equity issue of $155 million and has brought it's debt ratio down.But it has been caught in a range of $17 to $20 per share for the last two years.In addition, higher interest rates in 2016 will put an upper limit on the share price.A prudent move might be to dispose of some of it's long kept assets.Some may have a low capitalization rate and some may have embedded gains but little future gains.This will give it some cash and reduce debt. This strategy will allow Cominar to move into Ontario in a bigger way.This will diversify and reduce it's overall risk.It may also increase it's overall capitalization rate.Then investors may push the stock price above $20 by the end of 2015.Small changes by Cominar will produce small changes in it's share price before 2016.But selling some of it's older properties may give it the impetus to move closer to it's value 3 and 4 years ago when it traded close to $25 per share.
Growth in Revenues and Earnings
Cominar reports in it's press release that operating revenues increased by 31 % from Q1 2014;they went from $174 million to $229 million.While net operating income increased to $119 million for a 31% increase.Cominar has had increases in revenue each quarter for the last four quarters.Together with the three new acquisitions there should be revenue increases for the next quarter also.At a capitalization rate of 8.1% the expected income stream will be $365,000 a year so this should produce additional income and additional revenue of at least $2 to $3 million here.
The rest of the year
Cominar now has total assets of $8.2 billion and has reduced it'sdebt ratio(excluding convertible debentures) to 52%.It is a sizeable REIT and is showing good growth in both revenues and income.It just completed an equity issue of $155 million and has brought it's debt ratio down.But it has been caught in a range of $17 to $20 per share for the last two years.In addition, higher interest rates in 2016 will put an upper limit on the share price.A prudent move might be to dispose of some of it's long kept assets.Some may have a low capitalization rate and some may have embedded gains but little future gains.This will give it some cash and reduce debt. This strategy will allow Cominar to move into Ontario in a bigger way.This will diversify and reduce it's overall risk.It may also increase it's overall capitalization rate.Then investors may push the stock price above $20 by the end of 2015.Small changes by Cominar will produce small changes in it's share price before 2016.But selling some of it's older properties may give it the impetus to move closer to it's value 3 and 4 years ago when it traded close to $25 per share.
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