Cominar REIT has a strong quarter
Back on August6,2015 Cominar REIT ,a Quebec based reit, released it's second quarter results.Cominar actually is the largest REIT in Quebec and the third largest REIT in the country.And it had another in a series of solid quarters.Operating revenues,net operating income and distribuable income were all up solidly.Cominar also redeemed $300 million of it's E series debentures before maturity.
Operating Statistics
All of their operating statistics were ahead substantially.Net operating income and operating revenues increased by 26%.While distribuable income increased by 30%.However distibuable income per share remained constant at $.40 per share.Recurring funds from operations and adjusted recurring funds from operations were up 26% and 28% respectively.But again the per share figures were almost unchanged.Cominar had one or two equity issues and increased the number of shares so that the percentage increase in shares matched the healthy 26 to 28% increase in it's other figures.It's debt ratio (including convertible debentures)
went down from 54% to 52%.
New Growth
Cominar has 567 properties in 3 real estate segments;it has office properties,retail properties, industrial and mixed use properties.Total assets were up almost 30% from 2014 to $8.3 billion.It is a rapidly growing REIT.And on April 23,2015 it acquired 3 new industrial properties in the Montreal area for $35 million.The combined capitalization rate was 8.1% and the combined space was 697,000 square feet .The Montreal area remains a good area to buy in as prices have not returned to their former levels.It is not likely that Cominar will match this growth in revenues and operating income in the next quarter.But earnings per share will probably increase as Cominar is not expected to have another equity issue this year.
Cominar has increased assets by a whopping 60% in the last two years.While prices were high in the Toronto and Vancouver market prices have been at bargain levels in most of the rest of Canada.Now it has to increase the capitalization rates on these properties.It is also likely that there will be further acquisitions in 2015.As this is a good time for Cominar to make use of the low interest rates and issue more debt.Their cost of capital on debt now is lower than their cost of equity.At it's present stock price their cost of equity is about 8%. This blog expects that Cominar may have another subordinated bond issue to raise some debt in this low interest environment.As their debt /equity ratio is only at 52%.A small debt issue of $200 to $250 million will allow Cominar to make more acquisitions.As in my last blog (on Cominar) I recommend further acquisitions in Ontario to give it's asset mix the right balance- perhaps in the Ottawa area.Also an acquisition or two in eastern Canada with their low real estate prices may help to raise overall capitalization rates.A few acquisitions ( if immediately accretive) may raise net operating income from $122 million in this quarter to the $145 to $150 million level.This will be enough to raise e.p.s. and it's price/earnings ratio (at 11) is already low for REITs.If this happens then look for Cominar to reach the $19 level again maybe in 2016.
see blogdaleupsome for financial analysis see blogdaleupsome for financial analysis on reits
Operating Statistics
All of their operating statistics were ahead substantially.Net operating income and operating revenues increased by 26%.While distribuable income increased by 30%.However distibuable income per share remained constant at $.40 per share.Recurring funds from operations and adjusted recurring funds from operations were up 26% and 28% respectively.But again the per share figures were almost unchanged.Cominar had one or two equity issues and increased the number of shares so that the percentage increase in shares matched the healthy 26 to 28% increase in it's other figures.It's debt ratio (including convertible debentures)
went down from 54% to 52%.
New Growth
Cominar has 567 properties in 3 real estate segments;it has office properties,retail properties, industrial and mixed use properties.Total assets were up almost 30% from 2014 to $8.3 billion.It is a rapidly growing REIT.And on April 23,2015 it acquired 3 new industrial properties in the Montreal area for $35 million.The combined capitalization rate was 8.1% and the combined space was 697,000 square feet .The Montreal area remains a good area to buy in as prices have not returned to their former levels.It is not likely that Cominar will match this growth in revenues and operating income in the next quarter.But earnings per share will probably increase as Cominar is not expected to have another equity issue this year.
Cominar has increased assets by a whopping 60% in the last two years.While prices were high in the Toronto and Vancouver market prices have been at bargain levels in most of the rest of Canada.Now it has to increase the capitalization rates on these properties.It is also likely that there will be further acquisitions in 2015.As this is a good time for Cominar to make use of the low interest rates and issue more debt.Their cost of capital on debt now is lower than their cost of equity.At it's present stock price their cost of equity is about 8%. This blog expects that Cominar may have another subordinated bond issue to raise some debt in this low interest environment.As their debt /equity ratio is only at 52%.A small debt issue of $200 to $250 million will allow Cominar to make more acquisitions.As in my last blog (on Cominar) I recommend further acquisitions in Ontario to give it's asset mix the right balance- perhaps in the Ottawa area.Also an acquisition or two in eastern Canada with their low real estate prices may help to raise overall capitalization rates.A few acquisitions ( if immediately accretive) may raise net operating income from $122 million in this quarter to the $145 to $150 million level.This will be enough to raise e.p.s. and it's price/earnings ratio (at 11) is already low for REITs.If this happens then look for Cominar to reach the $19 level again maybe in 2016.
see blogdaleupsome for financial analysis see blogdaleupsome for financial analysis on reits
Comments
Post a Comment