On Monday, the S&P 500 was up 0.3% while Toronto was up 0.9%.
Toll Brothers was up 6.1% to $42.15 as U.S. home builder sentiment was reported to be very strong.
Going the other way, AutoCanada gave back 7.9%. This comes after its recent sharp increases.
Boston Pizza Royalty was down 7.1% reversing most of its gain of last week.
The report for the Melcor REIT is updated and rated Buy at $3.95 . The REIT had a relatively strong Q2 considering the virus situation. There has been insider buying. The CEO seemed quite upbeat on the conference call. On the other hand it seems sure to report poor adjusted earnings in Q3 as it will be “eating” 25% of the rent for small business tenants that qualify for a federal rent relief program. It did not recognize any expense for this in Q2 even though it expects to forego $500,000 in respect of Q2. Overall the 9% distribution appears to be sustainable and could increase moderately.
Its rental buildings are marked to market and it suffered a 7% decline in building values this Q2 due to market conditions. Interesting, market value does NOT mean what the building could be sold for right now. It is more what the buildings SHOULD sell for based on various model assumptions. The mark to market does not consider fire sale prices. Still with the equity in the buildings trading at 43% of book value, the units do appear to be under-priced in the market.
The REIT has been conserving cash by deferring mortgage and even utility and property tax payments where possible. It is a bit sobering to see a publicly traded entity so thin on cash that it feels the need to defer utilities and property taxes. In large part this may be due to the tax legislation that allows REITs to escape income taxes as long as they distribute out and do not retain virtually any of their taxable income. In addition keeping cash in the bank would lower its ROE. An upside of this is that the REIT may NEED to partially restore its former distribution level in order to remain tax-free.