Globe & Mail ArticleIt looks to me like the hype is gaining traction rather than dying down. GLTA
-------------------------------------------------------------------------------------------- A very warm welcome to the first trading day of 2017.
This morning, major North American stock markets look to start the new year off on a positive note.
On the commodity front, the price of oil is up 2 per cent, approaching the $55 (U.S.) mark.
In terms of news releases, two key U.S. reports to watch for today are the December ISM manufacturing index and November construction spending data, both reported at 10 a.m. (ET). The Street is anticipating an ISM manufacturing reading of 53.7, up from 53.2 reported last month. Economists are forecasting construction spending to have increased 0.5 per cent month-over-month.
Briefly recapping Friday's performance, it was a negative day for major North American stock markets, with a lack of buyers ahead of the New Year's Day holiday long weekend.
In the U.S., the Dow Jones industrial average, S&P 500 index, and Nasdaq composite closed down 0.29 per cent, lower by 0.46 per cent, and down by 0.90 per cent, respectively. In 2016, the Dow Jones industrial average advanced 13.4 per cent, the S&P 500 rallied 9.5 per cent, and the Nasdaq composite increased 7.5 per cent.
Turning to Canada, on Friday, the S&P/TSX composite index lost 135 points, or 0.87 per cent. There were 56 securities in the TSX index that advanced, 189 securities declined in value, and five stocks closed the day unchanged.
The TSX index gained 1.36 per cent in December, advanced 3.81 per cent in the fourth-quarter, and achieved a solid price return of 17.51 per cent in 2016. The strong gain in 2016 was led by strength in resources -- the materials and energy sectors. The S&P/TSX small-cap index rallied 35 per cent in 2016, and the S&P/TSX Venture composite index soared 45 per cent last year.
On today's TSX Breakouts report, there are 23 stocks on the positive breakouts list (stocks with positive price momentum), of which eight names are from the real estate sector, three are businesses in the restaurant industry, and there are six stocks from the energy sector. There are just three securities on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security from the real estate sector that is just pennies away from making an appearance on the positive price breakouts list. This real estate investment trust (REIT) is highly recommended by analysts on the Street, as all 12 analysts covering it have 'buy' recommendations. The security highlighted is Milestone Apartments Real Estate Investment Trust (MST.UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The REIT
Milestone has a portfolio of 79 multifamily residential properties, all located in the United States.
On Dec. 15, Milestone completed the acquisition of a six-property portfolio with 1,460 apartment units located in Orlando, Fla. To help finance the purchase, Milestone recently raised approximately $192.6-million (Canadian) in a bought deal equity offering, issuing 10,439,000 units at a price of $18.45 per unit.
On Nov. 10, Milestone reported solid third-quarter financial results that were relatively in-line with expectations. Funds from operations (FFO) per unit came in at 28 cents (U.S.), a penny shy of the consensus estimate. Adjusted funds from operations (AFFO) per unit was 25 cents, in-line with the consensus estimate. Same-store net operating income climbed 9.1 per cent year-over-year. Same-store average monthly rents increased 6 per cent year-over-year. Same-store occupancy was stable at 94.9 per cent.
Distribution policy
Last October, Milestone announced that the Board of Trustees approved a 10-per-cent increase to its monthly distribution, raising it to 5.041 cents (U.S.) per unit, up from 4.583 cents per unit effective January 2017 and payable in February 2017. The new distribution will represent 60.492 cents per share on an annualized basis, or a distribution yield of 4.3 per cent.
The distribution appears sustainable with room for further future expansion. The AFFO payout ratio was 58 per cent for the first nine months of the year.
Valuation
The units are trading at a price-to-FFO multiple of 12.3 times the 2017 consensus estimate.
The average one-year target price is $22.15, implying the unit price may appreciate by more than 16 per cent over the next 12 months. Target prices range from a low of $21 to a high of $23.75. Individual price targets are as follows: two at $21, two at $21.50, three at $22, two at $22.50, two at $23, and $23.75.
Analysts' recommendations
The REIT is covered by 12 analysts on the Street, all of whom have 'buy' recommendations. The 12 firms providing research coverage on Milestone are as follows in alphabetical order: BMO Capital Markets, CIBC World Markets, Desjardins Securities, Dundee Capital Partners, GMP, Industrial Alliance Securities, Laurentian Bank Securities, National Bank Financial, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
The Street is forecasting FFO per unit of $1.07 (U.S.) in 2016 and $1.15 in 2017. The consensus AFFO estimate is 94 cents in 2016, rising approximately 9 per cent to $1.02 in 2017.
Chart watch
In 2016, Milestone was amongst the top performing securities in the S&P/TSX composite index real estate sector with its unit price rising over 26 per cent.
The unit price came under pressure in September and October, before stabilizing around the $18 level in November.
In late December, the unit price strengthened on high volume. On Dec. 20, for example, the unit price jumped 4 per cent with over 1.1-million shares traded, well above the two-month historical daily average trading volume of approximately half a million shares.
In terms of key resistance and support levels, the unit price faces initial overhead resistance around $20, and after at a price just north of $21. There is initial downside support around $18, which is close to its 50-day moving average (at $18.19). Failing that, there is support at $16.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indices that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
Tue, 3 Jan 2017 8:15 EST