Opinions
David Baskin
Morguard Corporation
MRC-T
COMMENT
Aug 29, 2018
Stock price when the opinion was issued
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Premium contentThe company owns a diversified portfolio of residential and commercial property portfolio worth $19 billion. It is benefitting from growth in immigration into Canada and sees the commercial sector stabilizing going forward. It trades below book value and at 10x earnings. We recommend a stop-loss at $95, looking to achieve $150 - upside potential of 40%. Yield 0.5%
Premium contentWe reiterate MRC, a leading North American real estate management company, as a TOP PICK. As the BoC holds interest rates from further increases, and rental rates are up over 10% across the country, we expect the company to continue reporting quarterly increases in cash reserves to allow for further retirement of debt and to buy back shares. It trades at 4x forward earnings. We continue to recommend a stop loss at $95, looking to achieve $125 -- upside over 18%. Yield 0.%%.
(Analysts’ price target is $145.00)Premium contentPremium contentWe again reiterate MRC as a TOP PICK. The company feels inflation pressures are easing, which should help stimulate job growth and support rental demand in 2024. We like that cash reserves are growing while debt is aggressively retired and shares bought back. It trades under book value and at 16x earnings. We continue to recommend a stop at $103, looking to achieve $135 -- upside potential of 23%. Yield 0.5%
(Analysts’ price target is $135.00)Premium contentWe again reiterate MRC as a TOP PICK. The company has been selling some non-core assets, allowing for cash reserves to grow and for debt to be aggressively retired. The company still holds assets over $11 billion. It trades at 5x earnings and under book value. We recommend maintaining a tight stop at $103, looking to achieve $135 -- upside potential of 22%. Yield 0.5%
(Analysts’ price target is $135.00)Premium contentWith inflation pressures beginning to ease and interest rates plateauing, we again reiterate MRC as a TOP PICK. Management sees resiliency in commercial and multi-family properties going forward. It trades at 6x earnings, under book and the company has built cash reserves, while aggressively retiring debt. We continue to recommend a stop at $103, looking to achieve $140 -- upside potential of 17%. Yield 0.5%
(Analysts’ price target is $140.00)Premium contentPremium contentOur PAST TOP PICK with MRC has triggered its stop at $115. To remain disciplined, we recommend covering the position at this time. When combined with our previous guidance, this will result in a net investment gain of 5%
Certainly at 5X earnings MRC can be considered cheap. Shares are very tightly held with 74% held by a connected group. The dividend is fairly low and shares have not done much, so it is not our favourite, as we do prefer more growth. But we would consider it OK. There is always a chance of a privatization but not something we would count on and would not buy just on that possibility. Net asset value requires lots of estimates and can be a moving target. The last comment from the company on a conference call indicated $340/share as NAV. Note this would be pre-tax.
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Warning: You're in for the long term because it's very illiquid stock. A Hotel California where you check in anytime, but you can never leave. He loves this stock--great value. Companies like this either go private, is bought or it gradually rises in time. Trading at only half-book--incredible value.