Yorkton Equity Group Inc.
Stable Fundamentals Despite Slight Miss
Published: Jun 17, 2025
Author: FRC Analysts
*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.
Sector: Real Estate-Diversified | Industry: Real Estate
Ticker Symbols: YEG – TSX
Report Highlights
- Q1-2025 results came in slightly below our expectations, primarily due to a modest decline in residential occupancy. The dip in occupancy was due to tenant turnover following YEG’s rent increases implemented after recent renovations. This strategy is gaining traction, with rents up 3% QoQ and 5% YoY, compared to a nationwide decline of 3%. Edmonton (YEG’s primary target market) has been more resilient, as rents have remained relatively flat YoY.
- Management expects occupancy to improve in the coming quarters as new tenants move in.
- Approximately two-thirds of the portfolio is situated in Alberta, while the remaining one-third is in B.C. Unlike B.C., Alberta is not subject to rent controls.
- Q1 revenue rose 4% YoY but missed our estimate by 1%, primarily due to lower occupancy. EBITDA and adjusted EPS were flat.
- At the end of Q1, YEG owned $135M in real estate investments (unchanged QoQ, and up $8M, or 6% YoY), including 10 residential projects totaling 519 units, and one commercial project spanning 28,026 sq. ft. Given the rise in YEG’s rents in Q1, we now anticipate a 5.0% YoY increase in property valuations for 2025 (previously 3.5%).
- Since the end of 2024, the BoC has cut rates twice, totaling 50 bp. We see room for one or two more cuts this year, driven by rising unemployment, geopolitical/trade risks, and concerns over potential weakness in GDP growth. Lower rates and higher rents should compress cap rates, and boost property valuations.
- We maintain a positive outlook on the Canadian multi-family residential market, buoyed by strong rental demand, elevated property prices, and challenges in affordability due to high mortgage rates for new homebuyers.
- YEG’s forward EV/EBTIDA is 15x vs the sector average of 19x, a 23% discount.
Fundamental Research Corp. Equity Rating Scale:
Fundamental Research Corp. Equity Rating Scale (ratings are not a recommendation to acquire, dispose of, or take no action regarding a security; the definition of our ratings are explained below):
- Buy – Fair value is 12% above the current market price; or risk and reward is favorable
- Hold – Fair value is between 5% to 12% above the current market price
- Sell – Fair value is 5% above, or less, than the current market value; or risk and reward is unfavorable
- Suspended or Rating N/A – Coverage and ratings suspended until more information can be obtained from the company regarding recent events.
Fundamental Research Corp. – Risk Rating Scale:
- (Low Risk) – The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt.
- (Below Average Risk) – The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt.
- (Average Risk) – The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient.
- (Speculative) – The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative.
- (Highly Speculative) – The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues and may rely on external funding. These stocks are considered highly speculative.
Definition of FRC’s Fair Value Estimate – Our fair value estimate is the theoretical value of the company’s equity using widely accepted methods of valuation such as discount cash flow or comparables. IT IS NOT A TARGET PRICE or PREDICTION OF THE FUTURE STOCK PRICE.
Disclaimers and Disclosure
Analyst Certification: The views expressed in this report accurately reflect the personal views of the analyst, and no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed.
Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp.
Fundamental Research Corp. “FRC” owns shares of the subject company: No. The analyst owns shares of the subject company: No , does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company.
Annual fees ranging from $15,000 to $30,000 have been paid to FRC by Yorkton Equity Group Inc. to commission this report and research coverage including update reports. This fee creates a potential conflict of interest which readers should consider. FRC takes steps to mitigate conflicts including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. The issuer has agreed to a minimum of three updates and coverage cannot be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time.
The distribution of FRC’s ratings are as follows: BUY (69%), HOLD (3%), SELL / SUSPEND (28%). Yorkton Equity Group Inc.
This report contains “forward looking” statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company’s products/services in the marketplace; acceptance in the marketplace of the Company’s new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company’s periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter.
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