Disclosure: Yorkton Equity Group Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Price and Volume (1-year)
Investment Strategy
30+ year track record in real estate. The CEO owns 73% of YEG’s equity. Building a portfolio capable of potentially generating steady cash flows, and capital gains
YEG focuses on multi-family rental properties capable of potentially generating steady cash flows, and capital gains. Management’s key objectives include:
YEG’s portfolio includes 11 projects (unchanged QoQ), including 10 residential projects totaling 518 units, and one commercial spanning 28,036 sq. ft
Portfolio Summary
YEG owns 100% equity in its projects. At the end of 2024, YEG owned $134.8M in real estate investments, up 6% YoY, driven by an $8.0M gain in property valuations vs our forecast of $3.8M, fueled by higher rent
According to management, commercial occupancy climbed from 87% in Q4-2024, to 92% in Q1-2025. We anticipate property valuations increasing by 3.5% in 2025, driven by organic rent growth
Three residential properties in Edmonton accounted for 64% of YEG’s portfolio
2024 revenue was up 38% YoY, beating our estimate by 0.4%, driven by higher rents, and two property acquisitions in 2023. In 2024, residential rental revenue accounted for 92% of revenue (89% in 2023)
The following sections summarize YEG’s projects.
10 residential projects totaling $5.9M in NOI, valued at $123M, or $237k/unit
The tables below present key highlights of YEG’s residential projects.
Key Highlights
Three residential projects in Edmonton, totaling 375 units valued at $87M, or $231k/unit. The average cap rate is 4.8%
Four residential projects in Fort St. John, B.C., totaling 83 units valued at $13M, or $160k/unit. The average cap rate is 6.5%
Three residential projects in the rest of B.C., totaling 61 units valued at $23M, or $377k/unit. The average cap rate is 3.9%
One commercial/retail project in Edmonton, with RBC (TSX: RY) as the anchor tenant
Financials
2024 revenue was up 38% YoY, beating our estimate by 0.4%. EBITDA was up 39%, missing our estimate by 2.4%, as G&A expenses were 11.4% higher than expected
EPS was up 91% to $0.06 vs our forecast of $0.03 due to higher than expected property valuation gains ($8.0M vs $3.8M)
Gross and EBITDA margins were relatively flat YoY. Free cash flows were up 36% YoY
Debt to capital was 76% at the end of 2024 vs the sector average of 52%. As equity grows through potential gains in property valuations, YEG's debt to capital should trend lower
No outstanding options/warrants are in-the-money
FRC Projections and Valuation
We are raising our 2025 EPS forecast to $0.04 (from $0.03) on higher valuation gains ($5M vs $4M). Sector multiples are down 9% since our previous report in November 2024
Sector multiples are down 9% since our previous report in November 2024. YEG’s forward EV/EBITDA is 14x (previously 18x) vs the sector average of 19x (previously 20x)
Applying sector averages to our revenue and EBITDA estimates, we are arriving at a fair value estimate of $0.34/share (previously $0.32/share)
Valuation increased because we are now using our 2025 estimates vs 2024 previously
We are reiterating our BUY rating, and adjusting our fair value estimate from $0.32 to $0.34/share. YEG's impressive 2024 results, fueled by robust rental demand, and strategic property acquisitions, highlight its strong operational execution. Looking ahead, we believe favorable Canadian multi-family residential market dynamics, coupled with anticipated rate cuts, position YEG for continued valuation growth.
Risks
We are maintaining our risk rating of 3 (Average)
We believe the company is exposed to the following key risks:
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