Before we dive into today’s edition, open up our full initiation on Timbercreek Financial - we spent months digging into this one and it’ll be worth your time!

The unemployment rate fell to 6.6% in May, beating expectations for a flat reading…

… on the back of over 150K full-time job gains, which reversed the category’s YTD underperformance entirely.

That strength was broad-based at the industry level - with gains in construction, transportation, and manufacturing more-than-offsetting weakness in retail trade…

… and taking another 50 bps off the unemployment rate in Ontario, pushing it to the lowest level since September of 2024.

Overall, a positive print - which we’ll need more of to fix the structural problems in Canada’s labour market.

The Ivey PMI came in higher than expected at 58.2, indicating that purchasing activity expanded during the month…

… likely as an offset to declining inventory balances, as purchasers contend with slower delivery times…

… and higher prices driven by the Iran war.

The employment index held fairly steady during the month at 54.3…

… which tracks to the manufacturing employment gains in the jobs print above.

Our coverage of Timbercreek Financial (TF) is now live. The thesis is simple, so I’ll give it to you in a handful of charts:

Proven mortgage investor: Timbercreek’s $1.2B net mortgage portfolio (commercial) is skewed towards income-producing multi-residential assets in core markets and underwritten conservatively, generating stable distributable income through various economic backdrops.

Trading at an attractive valuation: Stemming from the rapid rise in interest rates post-pandemic, Timbercreek is working through elevated staged loan balances…

… resulting in the stock trading at 0.8x book value, which implies a market expectation for ~$120M of loan losses - much steeper than our estimates. We expect staged loan resolutions to drive a re-rate towards TF’s "true” go-forward book value.

Upside from capital redeployment: Those resolutions will also enable Timbercreek to redeploy capital into performing loans, supporting growth in distributable income that could lead to special dividends over and above its current 10.6% yield.

Together, these two levers for investment returns create a valuation “special situation” in what’s typically a slow and steady public equity.

For the web version of the report, go here.

For the PDF version, use the link below:

TerraVest (TVK) got a 30% haircut on Friday after its Executive Chairman was accused of insider tipping ahead of the company’s transformational $550M EnTrans deal…

… which weighed on the shares of other companies he’s affiliated with like Clarke (down 11%) and Calfrac (down 10%).

For TerraVest, the day-to-day shouldn’t be impacted - but with a multiple arbitrage roll up strategy being central to growth…

… any weakness in the multiple could shrink the pool of attractive targets, keeping investors cautious until the dust settles. Could be choppy for a while.

Was this forwarded to you? Join 10,000+ investors reading The Morning Meeting by clicking the button below.