CIBC Going up
What's Changed Q4/14 adjusted EPS was $0.36 (FD adjusted EPS was $0.30), above our $0.13 estimate and $0.13 in Q4/13, driven by fair market value adjustments and investment income growth in its contractual fees (+115%), Tricon American Homes - TAH (+97%) and Tricon Housing Partners - THP (55%). AUM was $2.5 billion, a 34% increase Y/Y, a result of newlyacquired investment accounts, TAH properties and unrealized foreign exchange gains, offset partially by distributions made to LPs. Tricon announced the appointment of Gary Berman as Chief Executive Officer effective Q1/15, replacing long-standing cofounder and CEO David Berman who will remain on the Board of Directors and assume the role of Executive Chairman. At the end of Q4/14, the firm had a working capital deficit of ~$6 million and a $50.7 million undrawn balance on its credit facility. Implications We have increased our 2015E diluted adjusted EPS to $0.63 (from $0.55) and our NAV to $11.35 (from $9.50) reflecting the acquisitions made in the quarter, stabilization of the existing assets and adjustments to our fair value estimates of the TAH portfolio in keeping with CIBC WM F/X estimates for 2015. We introduce our 2016E FD adjusted EPS estimate of $0.68/share. Effective Q1/15 the company's financial statements will be reported (and restated) in US dollars; in keeping with this our current estimates at spot F/X prices ($1.27 CAD/US) imply 2015E/2016E diluted adjusted EPS estimates of US$0.49 and US$0.54. Valuation At $10.21, Tricon trades at a 10% discount to our NAV estimate of $11.35 (from $9.50), which translates into a yield of 2.4%. Our 12- to 18-month price target is in line with our NAV estimate or $11.35 (from $9.50).