Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank analyst Himanshu Gupta remained overweight in industrial REITs after an industry conference,
“We are keeping an overweight position on Industrial REITs based on a combination of lower AFFO [adjusted funds from operations] multiples and higher AFFO-per-unit growth (which we believe is key to outperformance in the REIT sector); (1) we expect Seniors Housing to show the highest earnings growth among all asset classes in 2024; (Industrial REITs rank no. 3). However, we expect Industrial to show the highest growth in 2025 as interest expense becomes less of a headwind and SP NOI [same property net operating income] growth is likely to accelerate; (2) No valuation premium for Industrial REITs. Industrial REITs now trading in line with the REIT sector on a P/NAV basis (versus a 9-point premium, historically) and only a 0.5x turn premium on a P/AFFO multiple basis (versus a 3-turn premium, historically) ... We reiterate our SO rating on GRT and DIR "
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For risk-tolerant investors, the RBC global equity team has updated their Canadian Small Cap Conviction List,
“The Q2/24 Canadian Small Cap Conviction List has seen a total return of -2.0% QTD, with the non-resource portion -3.1% QTD and the resource portion flat QTD. This compares to the S&P TSX Small Cap Index total return of +2.8% QTD and the S&P TSX Composite Index total return of +0.8% QTD. This report features a comment from each contributing analyst on potential share price catalysts ahead … Non-Resource: Ag Growth International (AFN); Cargojet Inc. (CJT); Copperleaf Technologies (CPLF); Coveo Solutions Inc. (CVO); DRI Healthcare Trust (DHT.UT); dentalcorp Holdings (DNTL); Doman Building Materials Group Ltd (DBM); Enghouse Systems (ENGH); Exchange Income Corporation (EIF); Jamieson Wellness (JWEL); Minto Apartment REIT (MI.UT); Park Lawn Corporation (PLC); VerticalScope (FORA). Resource: Freehold Royalties (FRU); G Mining Ventures (GMIN); Interfor Corporation (IFP); Major Drilling Group International (MDI); Obsidian Energy (OBE); Pason Systems (PSI); Torex Gold Resources (TXG)”
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BMO senior economist Robert Kavcic sees no hurdles to the Bank of Canada cutting rates after recent inflation data,
“There’s precious little left on the inflation front to argue against the Bank of Canada cutting rates. Over the latest three months, each of the four key core inflation metrics has sunk below 2%. Over the latest 6- and 12-month period, these measures are all below the 3% mark. While there are some pockets of stickiness still out there (e.g., service inflation north of 4% y/y with strength in rent and mortgage costs), this is about as all-clear a signal as one could have hoped for heading into the summer. We know the Bank thinks there had already been enough progress made in terms of how much inflation has fallen. They’ve also wanted to see that progress sustained, and the April CPI data suggest just that”
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Diversion: “The Greatest Car Chases in Movie History, Ranked” – The Ringer (podcast)