Dream Unlimited Corp.
(DRM-T) C$45.00
Q1/22 First Look: EPS Ahead; Fee-Earning AUM Reaches $10bln
Event
Q1/22 results.
Impact: SLIGHTLY POSITIVE
Our Initial Take: Q1/22 results included a sizeable earnings beat and fee-earning AUM growing nicely. Despite the volatile markets, Dream continues to grow its AUM with the post-Q1 IPO of Dream Residential REIT, and the creation of new private funds (e.g. the recent $1.5bln GTA industrial/logistics property development joint- venture). Existing private funds have $1.6bln of committed and uncalled capital.
Results vs. Estimate: Q1/22 EPS (standalone basis) of $1.25 beat our $0.46 estimate. The largest favourable variances were in: i) condominium development (where the majority of units at Canary Commons took occupancy and generated higher-than-expected margin); ii) Dream Office (earnings from which included DIR fair value gains, which we did not forecast); and iii) fair value gains on the company's 11 rental apartment buildings in Toronto.
Recurring Income & Asset Management:
Q1/22 revenue increased 41% y/y to $43.6mm and net margin increased 26% y/y to $15.7mm. Total AUM is now $16bln (+$1.3bln q/q) and fee-earning AUM is now $10bln (+$0.9bln q/q and +65% y/y). Revenue growth was driven by each of Asset Management (external-customer fee revenues +44% y/y), income property acquisitions, and Arapahoe Basin.
Arapahoe Basin: Revenue was +17% y/y and in-line with our forecast, while net margin of $8.2mm and EBITDA of $9.1mm were essentially flat y/y and slightly missed our forecast on higher labour costs.
Development:
Development revenue in this seasonally-slow quarter included 33 lot sales (roughly half of last year and half of our forecast). However, the year is potentially shaping up to be better than previously thought, with sales commitments secured for 815 additional lots (last quarter: 794 lots) plus 31 acres. Additionally, we note that the average lot price has reached an all-time high of $152,000 (+8% q/q and +35% y/ y), partly the result of inaugural sales at Alpine Park commencing late last year. The aforementioned condominium closings at Canary Commons are included in equity- accounted income.
Balance Sheet:
Dream's debt-to-total-assets ratio increased to 39.5%. Dream repurchased 0.4mm shares in Q1/22 and current available liquidity declined slightly to $214mm. Dream did not update the previous $60/share detailed NAV (pre-tax) calculation.