Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC REIT analyst Dean Wilkinson surveyed the sector and looked to 2024,
“The Multi-family and Industrial asset class continue to see the most investor (and lender) demand as market rents continue to experience upward pressure, while current financing costs continue to mute new developments/constructions. Retail REITs also continue to exhibit strong operating fundamentals, notably those with necessity based anchors, which continue to draw increased leasing demand. The office and hotel REITs on the other hand, continue to face their own … and have seen reduced appetite from investors and lenders alike. Seniors continue to post improving operations, as occupancy continues to trend upwards (coming from a lower post pandemic base) … Valuations Remain Cheap By Historical Standards: REITS within our coverage universe are trading at an average approximately 32-per-cent discount to NAV, below the long-term average of 8 per cent. On a P/FFO [price to funds from operations] basis, our coverage universe is trading at 12 times compared to an historical average of 13 times. On an annualized basis, the REIT complex currently is yielding 5.3 per cent … While the consensus view is that we are indeed approaching the end of the rate tightening cycle and loan pricing should stabilize through 2024, the fact remains that current base-line borrowing rates remain at their highest levels since the 2008 financial crisis… and while there may be some near-term relief the market has come to accept the fact that we are, in all likelihood, here for longer.”
Mr. Wilkinson has “outperformer” ratings on Chartwell Retirement Residences, Smartcentres REIT, BSR REIT, Dream Residential REIT, Killam Apartment REIT, Tricon Residential Inc., Minto Apartment REIT, European Residential REIT, Riocan REIT, First Capital REIT and Morguard North American Residential REIT.
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RBC’s QuaDS Score top 40 list of stock picks analyzes companies for value, price momentum, growth and earnings predictability.
Analyst Bish Koziol has removed CCL Industries and Bank of Nova Scotia this month - both for falling value and momentum scores - replacing them with Cenovus Energy and Teck Resources.
The other stocks on the list are Imperial Oil, Canadian Natural Resources, Enerplus, Ovintiv, Pason Systems, Suncor Energy, ARC Resources, Stella Jones Inc., First Quantum Minerals, Labrador Iron Ore Royalty, Dundee Precious Metals, Richelieu Hardware Ltd., Thomson Reuters, Toromont Industries, Finning International, TFI International, Magna International, Loblaw Companies, Metro Inc., North West Company, Equitable Group Inc., Great-West Lifeco, Intact Financial Corp., TMX Group, Bank of Montreal, Fairfax Financial Holdings, IA Financial Corp., Open Text Corp., Celestica, Enghouse Systems, CGI Inc., Constellation Software, Quebecor, Rogers Communications, Cogeco Communications, Transalta Corp and FirstService Corp.
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BMO senior economist Robert Kavcic described the recent data on the housing market,
“Housing activity was mixed in November, with sales largely stable and subdued across major markets. Sales in Toronto were up slightly month-over-month but still down 6 per cent from a year ago. Calgary (the firmest market in Canada) saw sales up 8.8 per cent year-over-year, while Vancouver activity was up 4.7 per cent year-over-year. Listings across most markets are well above year-ago levels. For example, Toronto new listings were up 16.5 per cent year-over-year and, with sales sluggish, active inventory on the market is sitting 41 per cent higher than last year. As a result, prices continue to get pressured down on a month-to-month basis. Of course, this is a seasonally quiet period for housing, made worse by the fact that the market is not clearing very well at these high interest rates. The big test will come in the spring, when we’ll see even more listings, possibly some relief in mortgage rates (given the recent rally in the bond market), and the wildcard of how the economy and job market hold up into 2024″
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Diversion: The Best Movies of 2023 – The Ringer
Scott Barlow