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Desjardins Securities analyst Michael Markidis said Minto Apartment Real Estate Investment Trust‘s (MI.UN-T) virtual Investor Day event on Tuesday reinforced his bullish view, calling it one of his best ideas heading into the second half of 2021.
“Importantly, it showcased (1) management’s confidence in rental market fundamentals long-term, (2) the significant growth that can be achieved through development over the next several years, and (3) the expertise embedded within the entire organization,” he said.
Though its growth in the three years since it went public has been fueled largely by acquisitions, Mr. Markidis said Minto’s future centres on its development pipeline of more than 1,500 suites. He sees the phase being achieved through both balance sheet intensification and leveraging its convertible development loan program.
“MI’s average occupied monthly rent ($1,630) is the highest among the multifamily peer group,” he added. “Enhanced disclosure was introduced to provide greater comfort on affordability. Working professionals typically account for 65 per cent of new leases; those employed in the service industry account for much lower (24 per cent). The average annual qualifying household income within the portfolio is estimated at $98,000, which suggests the average rent-to-income is only 20 per cent.”
Also touting the potential stemming from its the rollout of its ESG program, which the use of artificial intelligence in building automation system optimization and real-time monitoring of natural gas and hydro consumption, Mr. Markidis raised his target for Minto units to $26 from $25.50. The average on the Street is $24.63.
Elsewhere, RBC Dominion Securities analyst Matt Logan increased his target to $25.50 from $25 with an “outperform” recommendation, while BMO Nesbitt Burns analyst Joanne Chen raised her target to $24.50 from $23 with an “outperform” rating.
“In our view, the event highlighted Minto’s high-quality portfolio and platform, which continues to be enhanced via MI.UN’s active intensification and repositioning efforts,” Ms. Chen said. “In addition, on the development side, Minto continues to leverage its partnership with Minto Group, a strategic advantage that we believe will further benefit the REIT in this environment given the significant compression in cap rates.”
“With the recovery well under way now in Canada, we continue to believe the quality of Minto’s portfolio will strongly attract the rebound in immigration and return to urban cores.”