RBC Capital Markets has adjusted its price target for shares of Morguard Corporation (MRC: CN) (OTC: MRCBF), increasing it to C$140.00 from C$135.00. The firm has kept its Sector Perform rating on the stock. This decision comes after the review of the company's second-quarter financial results.
Morguard reported a Normalized Funds From Operations (FFO) per share of C$4.74, which is a 16% decrease compared to the same period last year. This figure fell short of RBC Capital's estimate of C$5.03 per share. The shortfall was attributed entirely to higher current taxes due to new regulations that limit the deductibility of interest expenses.
The year-over-year decline in Morguard’s performance was primarily due to the sale of its hotel portfolio. Despite the lower-than-expected FFO, RBC Capital's estimates remain largely unchanged.
The firm notes that lower interest expenses have balanced out the increased tax costs. Morguard's significant liquidity, amounting to C$298 million or C$27.50 per share, was highlighted as a key financial strength.
A significant development during the quarter was the appointment of George Armoyan, who owns 11% of Morguard's stock, to the company's board of directors. RBC Capital does not anticipate any activist moves following this change. The updated price target of C$140 represents a modest 4% increase from the previous target.
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