The economics of the storage business are highly attractive, with a highly cash-generative model and limited capital requirements to maintain the assets. The company runs a highly leveraged balance sheet, which SVI has partially hedged with around 88% fixed-interest debt. Similar to other real estate operators, SVI is expected to benefit from declining interest rates, which not only improve valuation but also make it cheaper to refinance debt and fund acquisitions. Canadian self-storage is one of the best-performing niche real estate asset classes with a long runway for growth and consolidation, and SVI is well positioned to perform well over the long term. The company has also started to repurchase shares in recent years for the first time, indicating management believes the shares look attractive. We think SVI is a unique real estate compounder run by management with a decent track record of value creation. Given the company has maintained healthy organic growth and actively repurchased shares, we are open to a future upgrade, but for now, to remain conservative, we are maintaining our rating at “B”.

ENB owns regulated assets with contracted, inflation-protected earnings and predictable cash flows that support the balance sheet. The company has maintained a disciplined approach to capital allocation, balancing a strong financial position, growth projects, and capital returns. ENB has increased dividends for 30 consecutive years and represents an attractive investment for wealth preservation and income generation, effectively serving as a “bond proxy” for income investors, which has become increasingly attractive amid declining interest rates. We believe the company will benefit from near-term tailwinds from lower interest expense and improved access to financing to fund growth. The geopolitical noise around Venezuela has pressured ENB’s share price, but we view this as sentiment-driven rather than fundamental. We remain confident in ENB’s long-term prospects. If the company continues to execute well, long-term investors could expect annualized total returns in the range of 10%–12% through a combination of dividends and capital appreciation. We maintain our rating at “B+.”

The company has recently changed its legal status from an income fund trust to a corporation and changed its name to Richards Group (RIC). RPI.UN’s share price has been stagnant for a few years now, and while we believe its valuation could be considered cheap if growth resumes, in general, we feel there are better opportunities in the current market with more promising prospects to deploy capital. As a result, we are dropping coverage on Richards Packaging Income Fund (RPI.UN) / Richards Group (RIC).