TSX:CRR.UN - Post by User
Post by
savyinvestor333on May 20, 2021 11:26am
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Post# 33237601
Scotia Upgrade
Scotia UpgradeA Top Growth and Income Idea With ~15% Total Return Potential
OUR TAKE: Neutral.
Our TP is +$0.25 to $18.00. We are resuming coverage post completion of a $100M equity raise at $16.60/un, including $41.5M from Empire to retain its 41.5% ownership interest. The 6.02M units issued (incl. 2.5M Class B LP units) = 4% of previous units o/s, with the net proceeds of $97.7M expected to help fund its attractive development pipeline along with value-add capital programs (i.e., store modernizations, hub-and-spoke strategy, etc.). Positive view intact. We encourage you to review our 27-page Spotlight Upgrade note on April 26 (see link below). Bottom-line, we think CRR is an attractive option for both Growth and Income mandates.
The 10% NTM NAVPU growth exceeds ~7% sector avg., while CRR trades roughly in line with NAV, consistent with the sector (Exhibit 1). We retain high conviction in a ~15% Total Return (i.e., unit price of $18.50 in 2022) and remain buyers here. Shifting from Successful Penalty Kill to Power Play;
Upgrading to Sector Outperform KEY POINTS Estimates are largely intact. CRR issuance price (net of commissions) of $16.21 was ~2% below our $16.50 Current NAVPU (intact) and 11% below our prior $18.25 Forward NAVPU, which we've left intact by giving a bit more credit on the Oakville Residential Development (now 85% in our Forward NAVPU vs. 75% before). We had previously included a $175M equity raise at $16.50 in Q3/21, so our 2022E FFOPU and AFFOPU inch up 1% on the lower raise (2021E is intact). CRR remains only REIT in our universe with 10%+ NTM NAVPU growth and 5%+ distribution yield.
We think CRR offers the best of both worlds, as shown in Exhibit 2 and 3 (Grocery-anchored Retail remains in high private market demand). Residential development completions is a game-changer. We think three near-term development completions in the Oakville, Vancouver, and Montreal could add $1.00+ of NAVPU and 5%+ AFFOPU growth (Exhibit 4). As shown in Exhibit 5, we est. near-term CRR development value = ~11% of existing CRR portfolio value vs. 6.5% Retail REIT average; we think this bodes well for unit price growth through 2022. Pro-forma leverage falls 240bp and 0.4x to ~46.0% and 9.2x compared to 43.5% and 9.3x sector avg. (Exhibit 6); liquidity increases to ~$570M