Summit Industrial Income REIT swept up in a tide of selling

Jan 22nd, 2016 – 1 Comment

A micro cap player in a niche sector of real estate


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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SMU.UN LOGO

Hi Lou
I enjoy your analysis.
Would you please take a look at Summit Industrial REIT.

Thanks

Allan

 

Hey Allan,

Thanks for the assignment. This will be my first look at Summit Industrial Income REIT (SMU.UN TSX). The trust invests in light industrial properties across Canada. SMU.UN has one property in New Brunswick, two in each of Alberta and British Columbia, eleven in Quebec, and 29 in Ontario. The market capitalization is $128.9 million and the average daily volume over the last three months is 23,086 shares. These factors highlight that we are examining a micro-cap player with thin trading volume operating in a market niche. Management’s thesis is that the light industrial market is fragmented providing opportunities for consolidation.

An audit of the charts will inform my opinion of this investment.

 

 

SMU.UN

The three-year chart depicts units that had been trading in a range for two years. Support could generally be found at $5.75 and resistance at $6.25. SMU.Un breached support as we came into 2016 and touched a 52-week low in January. From the research conducted it would seem that the decline in the units has arisen mostly from the general market malaise as opposed to an industry specific issue or a management related issue.

 

 

 

 

SMU.UN2

The six-month chart indicates that the MACD and the RSI generated sell signals in late November of 2015 as the units pulled back from resistance near $6.20. SMU.UN broke below support along the 50 and 200-day moving averages in early December as the retreat continued into mid month.

A brief leg up took the units to resistance along the moving averages by the end of December 2015. The MACD and the RSI generated sell signals in early January of 2016 as SMU.UN took on water with the rest of the markets.

At this moment in time there are no clear indications that we can expect a trend reversal. If you are going to bottom fish this one you might be best served to ease into a position slowly. Pick away at it until we get a better sense of market direction.

 

Next time I will investigate the case for Husky Energy Inc. (HSE TSX) for Gill.

 

Make it a profitable day and happy capitalism!

 

 

 

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