REAL has been in a prolonged industry downturn over the last two years due to the challenging macro backdrop of rising interest rates. That being said, the headwinds have already started to show some early signs of a reversal into tailwinds. Although it is still early days of the next cycle, management is well aware of positioning the company to get through tough times and ride the next wave of a cyclical upturn. Management has targeted an ambitious long-term operating model over the long term, which could create meaningful shareholder value if achieved. That being said, REAL is highly cyclical and volatile with limited visibility into future demand, REAL is a volatile name with some meaningful upside potential if management demonstrates execution. This is a high-risk name that investors need to size the position accordingly. We are maintaining our rating at “B-”.

AW possessed an impressive operational profile with a track record of strong same-store-sales growth and healthy store count expansion. The strategic transaction of converting to a corporation transformed AW into a more compelling investment story. AW now, not only has an attractive dividend yield, but is also a growth-focused company that offers decent upside potential from capital appreciation as the company expands the burger chain. In addition, this transition could attract institutional ownership and research analyst coverage, which could help improve the company’s valuation. AW also prioritizes balance sheet optimization, which balances between maintaining a dividend and optimizing the capital structure to create shareholder value. We are initiating our rating at a “B”.

BPF.UN remains a cheap name for capital-light income-seeking investors but with limited growth prospects, as BPF.UN is a mature business that focuses on generating sustainable yield rather than growth. That being said, there is an upside optionality for a strategic acquisition that is not priced in yet, which recently happened with one of its peers – A&W Corporation. BPF.UN is an interesting high-yield name for income-seeking investors, which becomes even more appealing amid a declining interest rate environment. Overall, BPF.UN’s operating results have not shown tremendous improvement yet. BPF.UN is still an attractive royalty income play with some “upside optionality”, either as a target acquisition or from operational improvement. We will maintain our rating at “B-“ for now but will remain open to a downgrade if operating results do not improve.