Q: I like Daniel Drimmer and have made some good gains with his companies. I re-purchased a small position in TNT.UN after selling the previous variant into a takeout offer, if my memory serves. My question: Is TNT.UN worth a long term hold? Is the strategy of taking its lumps by stopping the dividend until recently going to lead to future growth?
5i Research Answer:
We think it was the right move. As a small REIT, investors are always inherently skeptical right away, and having a high debt load AND a high payout ratio are simply more reasons to avoid units. Valuation is very low, and will only improve if investors become more confident overall. Cash flow is not growing much, but is stabilizing. The next step we think is to reduce debt. We would prefer to wait here. There is still some work to be done, and we think buyers have time. Sentiment may improve on the company, but the outlook for commercial and retail is not exact robust right now. Lower rates could help things, but we think for now this is one to watch and not load up on.