Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Domestic real estate companies are doing a remarkable job stickhandling the negative effects of the pandemic and government support initiatives.
CIBC’s report on RioCan REIT’s quarterly results was called “No rent left behind”,
“We believe [funds from operations] is set to rebound in subsequent quarters, given: 1) significant provisions for abatements and bad debts were recognized in the quarter (which account for further predicted abatements), implying that such charges should be more modest going forward; and 2) cash rent collected is trending decidedly upwards (85% to-date in July), with management suggesting that this metric could level off at 90%+ by the end of the year. While occupancy and leasing spreads could see further pressure through year-end, we believe the impact of such will prove to be modest in comparison. Consequently, we believe the units offer significant valuation optionality (38% discount to our NAV)”
“@SBarlow_ROB CM on Riocan: “No rent left behind”' – (research excerpt) Twitter
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Separately, Allied Properties REIT CEO Michael Emory noted that “Every data point we’ve seen suggests the work from home theme is overblown” in a wide-reaching interview with BNN Bloomberg.
Mr. Emory specifically referenced Shopify Inc.
The company had previously announced plans to allow a large number of employees to work from home permanently, but Mr. Emory said that Shopify had reiterated its commitment to expansive new office space in Canada.
“Every data point we’ve seen suggests the WFH theme is overblown: Allied CEO” – BNN Bloomberg (video)
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Citi economist Dana Peterson continued with the research firm’s skeptical stance on the sustainability of the market rally,
“The USD continued to weaken as mobility indicators stalled with the steady rise in coronavirus cases, the Fed signaled extreme dovishness, and Washington flirted with fiscal cliffs as pandemic supports approached expiry. Citi commodities states that the record pace of ETF investor inflows, a weakening US$, wider inflation breakevens, and negative real yields are the primary drivers for the push higher in precious metal prices… Central banks are keeping the liquidity and credit spigots on full blast, yet key ingredients to a sustainable recovery are failing to coalesce. We note that the outlook for business investment away from tech is morose, signaling the potential for a jobless and capex-starved recovery (Figure 3). The ample supply of liquidity points less toward higher producer or consumer inflation and more to asset price inflation that provides limited support for Main Street”
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BMO economist Doug Porter published an interesting chart showing that the TSX has been providing a leading indicator for the broader North American economic recovery. The accompanying chart also highlights some short term risk as U.S. jobless claims surprise to the upside,
“U.S. initial jobless claims may be one of the single best timely indicators available on how the recovery is progressing. And, they have gone into reverse in the past few weeks. However, we believe some of this is due to questionable seasonal adjustment factors… Now recall that we suggested last week that the humble TSX was also acting as a very good leading indicator for the broader North American economy. And, sure enough, it fits claims very well indeed. (The TSX is advanced six days in the chart.) So, if the U.S. upturn truly does stall …”
“@SBarlow_ROB BMO: TSX as leading indicator for NA economic recovery” – (research excerpt) Twitter
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Diversion: “The effectiveness of lockdowns: Learning from the Swedish experience” – VoxEU
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Scott Barlow