Opinions
Michael Missaghie
Killam Properties Inc
KMP.UN-T
HOLD
Mar 19, 2014
Stock price when the opinion was issued
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Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The recent property acquisition was well received by the market. The $190M purchase looks good and 5i likes the expansion into Ontario to diversify the business. Occupancy rate is high at 98% and average rent is $1,200. Unlock Premium - Try 5i Free
KMP.un's second-quarter funds from operations (FFO) per unit came in at $0.30, an increase of 7.1% year-over-year. The company reported a net income of $114.5 million, against $68.7 million reported in the second quarter of 2022, beating estimates by a wide margin ($30.4 million). The jump was attributed to $96.2 million of fair value gains on investment properties in the period. KMP generated a net operating income of $56.2 million, an 8.8% increase from 2Q22. The rolling 12-month adjusted FFO payout ratio shrank by a full 2% to 73% in the recent quarter. Same-property net operating income growth came in at 7.9%, matching the management target. We think it was a decent quarter and management spoke about market rent growth in certain areas and a focus on development and disposition of assets.
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Now trading at an interesting level, over 15% discount to NAV. Fallen perhaps because of announcement on immigration being curtailed. 60% of portfolio in Atlantic Canada, actively diversifying in Ontario and BC. Likes that 44% of assets are not subject to rent control. Expecting results to be good. Stay the course.
Very well managed. Company size is in the top 5. Originally focused on the Maritimes, which has seen a lot of population inflows. Expanding into other markets in Ontario such as Kitchener-Waterloo. Likes that they're experienced developers, always improving. Energy-efficient, new construction. Not facing high-rent pressures of others.
Owner, operator and developer of apartment assets, with the majority being in the eastern provinces. Recently hit with higher natural gas prices, which depressed the cash flow. Also, got hit with some occupancy losses last year, which they have remedied. Net operating income will probably come in at 1%-2%, but there is the risk of operating expenses and then being able to manage it from a hedging perspective and how high natural gas prices actually go. Doesn’t expect much move in occupancy levels. His company is the largest shareholder. Believes the short-term hiccups are not reflective of the longer-term value. Trading close to a 12%-13% discount to NAV of about $11. Not adding to his position as he is finding better opportunities elsewhere.