TWC increases stake, reiterate Outperform rating
TWC increases its stake in APR to just under 13% on a fully exchanged basis...
TWC Enterprises Limited (TWC: TSX, unrated) disclosed that it raised its equity stake to 12.6%, up from 8.8% previously
on a fully exchanged basis. TWC is controlled by Morguard's Rai Sahi. The press release indicates that it has increased its
stake to 16% of the common units outstanding, up from 14% previously (the stake is roughly 6.1 mln units). When you include
APR's Class B units which are exchangeable into common units, we estimate that TWC now has a 12.6% equity interest in APR.
Ownership concentration is now quite high in the shares; this might offer some downside protection if needed. Dilawri,
the automotive dealership group that originally sponsored the REIT, owns a 26.0% effective interest in APR. TWC now owns
a 12.6% interest. We estimate these two entities and the next five larger holders (based on public disclosures via Thomson
Reuters) own over 50% of the units outstanding. This most recent tranche acquired by TWC was purchased at an average
price of $11.05 over the last year. With multiple large unitholders, it should give investors some comfort that there are
buyers out there should APR ever run into sufficient difficulty to materially impact the unit price. As we saw in Q3, however,
APR continues to execute well and offers investors an attractive proposition: low leverage, manageable payout, with high
collection rates.