Canaccord Genuity Raises Target to $14.25 Canaccord Genuity Corp. analysts Jenny Ma raised her target on Cominar REIT (CUF.UN-T) to $14.25 from $13 and kept her “hold” rating on more details about the real estate investment trust’s plans to sell off assets outside of Quebec.
Management said it will group properties outside Quebec into six to eight portfolios and that the sale process will take about 24 months.
“With healthy real estate market fundamentals in most markets outside of Alberta, we expect there to be healthy investor demand for Cominar’s assets in the Greater Toronto Area and Atlantic Canada, a view that is consistent with management’s expectations,” she wrote in a research note. “Not surprisingly, the Western Canada portfolio is expected to be the toughest to sell, and the REIT’s new target leverage of 48 per cent (more later) is therefore predicated on completing $1.0-billion of the estimated $1.2-billion in asset sales.”
Management plans to pay down debt, buy back units and add properties in core markets. The analyst believes the new target leverage of 48 per cent is achievable over the next two years. Leverage was 53 per cent as of June 30, the analyst said.
“We believe this announcement of a plan for asset sales and a strategy to focus on its legacy core markets is a step forward and the messaging was clearly welcomed by the market with the REIT’s units up 7 per cent this week,” the analyst said. “While this announcement is one of the first signs of a meaningful strategy to stabilize the REIT’s operational and financial positioning, we expect Cominar to continue to trade at a discount valuation until there is meaningful progression in the execution of the plan.”
The units closed Thursday at $13.46. Including an 8.5 per cent yield, the analyst’s target provides a 14 per cent total return.