Element Fleet Management Corp T.EFN

RBC

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The research team at RBC Capital Markets produced their Canadian chart book which included a number of useful observations,

“RBC Economics believes the most likely scenario remains that the Canadian and U.S. economies will enter mild recessions in 2023 … There remains risk of subdued growth if inflationary pressures and higher interest rates put significant downward pressure on disposable incomes. We recommend a risk-on/off barbell approach with a focus on risk/reward, and suggest that investors focus on stocks that offer a substantial degree of ‘self-help’ … For the Canadian Banks, as concerns about commercial real estate (CRE) exposures have been growing, we highlight that while the total average CRE exposure for the large Canadian banks has increased over the past decade to the most recent level of almost 11 per cent of total loans, credit performance has been solid as the average CRE impaired PCL ratio has remained consistently low since 2013. In Diversified Financials, Element Fleet is our #1 high-conviction best idea and we think Brookfield Corp.’s shares are significantly undervalued … Our 2023-24 FFOPU [funds from operations per unit] estimates reflect healthy, 3-5-per-cent annual growth. We believe fundamentals are recovering well across most subsectors, but a slower economy and higher rates could serve as headwinds. At 22 per cent below NAV, sector valuation is below our view of fair value (0-10-per-cent premium) and the historical average of NAV parity”