riocan

Plazacorp Retail Properties, $4.45, symbol PLZ on Toronto (Shares outstanding: 49.7 million; Market cap: $221.2 million; www.plaza.ca), is a real estate investment trust (REIT) that owns strip malls and enclosed shopping malls throughout the Atlantic provinces, Quebec and Ontario. Plazacorp owns interests in 106 properties, which together contain 4.7 million square feet of leasable area. The Atlantic provinces account for 69% of the company’s square footage, followed by Quebec (26%) and Ontario (5%). The trust’s occupancy rate is 96.9% at the strip malls, and 96.6% at the enclosed malls. National chains, such as Shoppers Drug Mart, Dollarama and Staples, account for 88.7% of the Plazacorp’s tenants. In the three months ended September 30, 2010, Plazacorp’s revenue rose 7.0%, to $13.4 million from $12.5 million a year earlier. Cash flow per share fell slightly, to $0.074 from $0.076....

Homburg Canada REIT, $11.45, symbol HCR.UN on Toronto (Units outstanding: 39.7 million; Market cap: $454.9 million; www.homburgcanadareit.com), owns 120 income-producing properties across Canada. These holdings include 6.9 million square feet of commercial leaseable area and 1,725 multi-family residential units. Homburg’s higher-profile holdings include Place Alexis Nihon and the CN Central Station Complex in Montreal, the Confederation Court Complex in Charlottetown and an interest in the PennWest Plaza in Calgary. Homburg Canada began trading in May 2010 at $10 per unit. The real estate investment trust has a yield of 8.3%....

ISHARES CDN REIT SECTOR INDEX FUND $14.43 (Toronto symbol XRE; buy or sell through a broker; ca.ishares.com) holds the 13 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT is limited to 25% of iShares CDN REIT Sector Index Fund’s value. iShares CDN REIT’s expenses are just 0.55% of its assets. RioCan REIT is the fund’s largest holding, at 24.5%, followed by H&R REIT (12.4%), Canadian REIT (8.9%), Calloway REIT (8.4%), Boardwalk REIT (7.3%), Primaris Retail REIT (5.8%), Canadian Apartment Properties REIT (5.8%), Dundee REIT (5.4%), Chartwell Seniors Housing REIT (5.0%), Cominar REIT (4.7%), Artis REIT (4.2%), Allied Properties REIT (3.8%) and Extendicare REIT (3.3%)....

RIOCAN REAL ESTATE INVESTMENT TRUST $23.94 (Toronto symbol REI.UN; Units outstanding: 250.9 million; Market cap: $6.0 billion; TSINetwork Rating: Average; Dividend yield: 5.8%; www.riocan.com) is Canada’s largest real estate investment trust (REIT). It has interests in 297 shopping malls in Canada, including 10 under development. These properties contain over 70 million square feet of leaseable area. The trust has a 97.4% occupancy rate. RioCan also owns stakes in 31 malls in the U.S. through joint ventures. As well, it owns 14% of Cedar Shopping Centers, a U.S. REIT that owns malls anchored by supermarkets and drug stores, mainly in the northeastern U.S. In the three months ended December 31, 2010, RioCan’s revenue rose 21.7% to $222.8 million from $183.1 million a year earlier. Cash flow per unit rose 25%, to $0.35 from $0.28. RioCan’s units yield 5.8%....

RIOCAN REIT $23.20 (Toronto symbol REI.UN; Units outstanding: 250.9 million; Market cap: $5.8 billion; TSINetwork Rating: Average; Dividend yield: 5.8%; www.riocan.com) has announced a new joint venture with U.S.-based Tanger Factory Outlet Centers. Over the next five to seven years, the two partners plan to build between 10 and 15 discount shopping malls in major Canadian cities. These new malls will use the successful Tanger format, which features outlet stores of upscale fashion retailers. RioCan and Tanger will each own 50% of these properties. RioCan will manage the malls, and Tanger will handle leasing and marketing. These new malls will make it easier for U.S. retailers to expand to Canada. That’s because many of these retailers already rent space in Tanger’s U.S. malls....

CGI GROUP INC., $19.17, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. In its fiscal 2011 first quarter, which ended December 31, 2010, CGI earned $126.6 million. That’s up 13.8% from $111.2 million a year earlier. The company paid $81.0 million to buy back shares during the quarter. Due to fewer shares outstanding, earnings per share rose 21.6%, to $0.45 from $0.37. That easily beat the consensus earnings estimate of $0.34 a share. As a result, the stock gained 5% this week. Revenue rose 22.7%, to $1.1 billion from $913.0 million a year earlier. If you exclude the negative impact of exchange rates, revenue would have risen 25.9%. Canadian revenue rose 0.5%, but U.S. revenue jumped 77.1%, because the company won a number of new federal government contracts. The U.S. gain also reflects the contribution of Stanley Inc., which CGI bought last year. Stanley provides computer-outsourcing services to military and civilian agencies of the U.S. government....

CGI GROUP INC. $18.09, Toronto symbol GIB.A, is our Stock of the Year for 2011. Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2011. If you’re not already a Stock Pickers Digest subscriber, click here to learn how you can get one month—including the Stock Pickers Digest Stock of the Year—FREE. CGI is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That lets CGI’s clients focus on their main businesses, and improve their efficiency. CGI is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk....

RIOCAN REAL ESTATE INVESTMENT TRUST $22.22 (Toronto symbol REI.UN; Units outstanding: 250.9 million; Market cap: $5.6 billion; TSINetwork Rating: Average; Dividend yield: 6.2%; www.riocan.com) has raised $150.7 million by selling 6.4 million new trust units at $21.75 a unit. RioCan will probably use the proceeds to pay down loans related to its recent purchase of shopping malls in the U.S. Most of these properties have grocery stores as anchor tenants. That helps cut the risk of these purchases, because these retailers stay busy no matter what the economy is doing. RioCan is a buy.

BANK OF MONTREAL, $61.74, Toronto symbol BMO, rose 4% this week after it reported earnings that matched the consensus estimate. In its 2010 fiscal year, which ended October 31, 2010, the bank earned $2.8 billion. That’s up 57.2% from $1.8 billion a year earlier. Earnings per share rose 54.2%, to $4.75 from $3.08, on more shares outstanding. Unusual items, such as severance costs and writedowns of securities the bank holds, depressed its fiscal 2009 earnings. If you exclude these items, earnings per share would have risen 19.9%. Earnings at Bank of Montreal’s main retail-banking division rose 7%, while its wealth-management business’s earnings gained 31%. However, earnings at its capital-markets division fell 6%. That’s because volatile stock markets and concerns over European sovereign debt hurt trading volumes. Revenue rose 10.4%, to $12.2 billion from $11.1 billion....

RIOCAN REAL ESTATE INVESTMENT TRUST $22 (Toronto symbol REI.UN; Units outstanding: 252.3 million; Market cap: $5.6 billion; Price-to-sales ratio: 6.3; Dividend yield: 6.3%; TSINetwork Rating: Average; www.riocan.com) operates 289 retail properties in Canada, mainly outdoor shopping malls. It also owns 28 malls in the U.S. through a joint venture it formed in 2009 with Cedar Shopping Centers Inc. (New York symbol CDR). RioCan owns 80% of this joint venture, and 14% of Cedar. The contribution from the new U.S. malls was the main reason why RioCan’s earnings rose 37.7%, to $39.2 million, in the three months ended September 30, 2010. A year earlier, the trust earned $28.4 million. Earnings per unit rose 33.3%, to $0.16 from $0.12, on more units outstanding. Cash flow per unit rose 20.0%, to $0.36 from $0.30. Revenue rose 14.6%, to $216.6 million from $189.0 million. RioCan pays monthly distributions of $0.115 a unit. The annual rate of $1.38 yields 6.3%. The trust paid out 95.4% of its cash flow in the past quarter. However, 16.0% of its investors prefer to receive new units instead of cash. On this basis, RioCan’s actual cash payout was a more reasonable 80.1% of its cash flow....