Tricon Capital Group (TCN.TO) Buy, Sell or Hold

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Tricon Capital Group (TCN.TO)

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15.34

-0.12 (0.78%)

as of May 2, 2024, 8:00:00 pm Market Open.

222 watching

BUY

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. It has gone through a corporate reorganization. The new focus on US single family houses has not shown results yet but its assets are solid and increasing in value. The stock is cheap at 12x earnings with shareholder support. Good growth potential. Unlock Premium - Try 5i Free

STRONG BUY

Owns a lot of this. They operate mostly single-family rentals in the US sunbelt, plus a smaller apartment portfolio there with possibly synergy. They offer affordable rents. This sector will have huge net operating income growth in 2021-22. Forget that home prices have been rising double-digit in the U.S. and will continue--we're in a long supercycle for U.S. housing. Very bullish Tricon with a lot of upside.

PAST TOP PICK

(A Top Pick Mar 05/20, Up 17%) Likes their strategy. Use technology adeptly, so margins and valuations have gone higher. Big runway.

TOP PICK

Owns 21,000 single-family units in the US sunbelt; this sector has seen a major tailwind during Covid. Covid has seen strong demand for spacious, suburban housing. Renting such a single-family home is cheaper (by sq. ft.) than a multi-family unit. TCN has enjoyed cash flow grow. Compared to its U.S. peers, TCN is very cheap. It has 50-80% upside if you apply the same valuation against its peers, like Invitation Homes, and apply the cap rate in its apartment holdings vs. peers. A vote of confidence happened when Blackstone invested in TCN. (Analysts’ price target is $12.69)

PAST TOP PICK

(A Top Pick Jun 25/20, Up 25%) Blackstone did a $300 million preferred investment in Tricon, a great vote of confidence in this company. TCN is a single-family rental home operator, mostly in the U.S. They were a major consolidator, post-2009 recession, exited at the end of 2019, but just re-entered the business. That's why the stock has rallied.

TOP PICK

Focused on single-family rental homes in US and multi-family apartments in Toronto. The latter class has benefitted from the work-from-home trend as well as millennials looking for more space as they start families. Offers affordable middle-market homes at lower rents than high-rise apartment buildings. Still trades at a discount to NAV despite at a 98% occupancy. Loves management and its capital allocation plan. (Analysts’ price target is $2.28)

TOP PICK

They are primarily focused on residential single family homes in the US. They focus more mid-market than their peers. The rents are lower so affordable for tenants today. About 98% occupied. There has been a lot of demand for people leaving high rises for single family homes. (Analysts’ price target is $11.39)

PAST TOP PICK

(A Top Pick Mar 05/20, Down 28%) They are primarily in the single family home rental sector. He thinks this is a highly defensive sector. They also own some multi-family in the sun belt. They have very affordable rents and that is the key. It sold off because the market thinks their leverage is too high. It is a talented management team.

TOP PICK

70% of their portfolio is the single family US rental homes. 18% discount to NAV with peers at a premium. Very strong management and a great board. (Analysts’ price target is $13.65)

WATCH

What's the breakout point and how do you know where and when it is? It's been range-bound for three years, bottoming about $9.50 and topping at $12. Now, we're at the top. Look for the chart to move higher (with good volume) to confirm this move up. This is significant, because four times before it has not. Then, it may fall back to $12 to test that breakout.

TOP PICK

They own 35,000 single-family homes in the US southwest. TCN has scale; they can manage all these homes. They pay a 3.5% dividend and he predicts strong growth. Hard to copy this company. (Analysts’ price target is $13.45)

DON'T BUY

Step back and long at the long picture of TCN. He sold it six years ago and hasn't done much since. They've done the right things and are in the right markets, but he's wary of their corporate compensation. What are the incentives of the management team? TCN has disappointed him.

WEAK BUY

A great story in real estate management. It's in a small up channel with resistance at the top. He's moderately bullish, expecting it to revisit $11.50 and eventually break above $12. He's decide whether to sell if it hits $12.

BUY

A REIT specializing in raw land Where? Long-term holdings of land can be lucrative--depending on location. Raw land is no good as a bond proxy--no income and you pay expenses. There are few public land development companies. Tricon and Howard Hughes (a past top pick) will give you some exposure and are well-run.

TOP PICK

Shrewd managers. Pays a 2.6% dividend. He targets $13.50. They're entirely in residential real estate which he likes--single-family homes in the southern US, and 7,200 US apartments, also land development. They're in high-growth markets. The stock is now cheap due to a big acquisition and a stock issuance. Expect a recovery this year. (Analysts’ price target is $13.33)

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Tricon Capital Group (TCN.TO)