Opinions
Michael Missaghie
NorthWest Health Prop Real Est Inv Trust
NWH.UN-T
COMMENT
Mar 18, 2015
Stock price when the opinion was issued
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Large collection of healthcare real estate around the world. Inflation linked leases (good for income). Sticky tenants with doctors and healthcare. Problem is too much floating debt (higher interest rates). Recently replaced management team. Confident on business going forward. Expecting strength going forward. Book value is around $6-$7/share (trading around $4).
Strategic review. Management changes. Multiple jurisdictions globally, not very efficient for a Canadian REIT especially with the state of its balance sheet. Lots of headwinds on balance sheet and distribution coverage. High leverage, tight coverage. Good assets, but not lots of options.
It has a 6.2% yield and he doesn't usually put higher yielding stocks into the equity platforms. This one came from the income platform. It fell so fast because it was over-leveraged but has now sold some of its assets. It is building a base and appears to be breaking out so he has bought two of the three legs. Buy 0 Hold 5 Sell 0
(Analysts’ price target is $5.85)One of the most attractive REITs on the TSX right now. Coming out of poor fundamental operations where capital allocation was mismanaged. New CEO cut dividend, sold properties. Prepared either way if interest rates fall or rise. Payout ratio will fall closer to 80%. Stock may have fallen recently because that new CEO is retiring next year. Yield is 7.3%, one of the highest out there.
Yes, in much better position today than previously. Management transition. Hard to see it going back to $10 levels anytime soon. Decent job allocating capital (ie. selling assets) to pay down debt. Enough to pay March debentures. Risk/reward not that compelling.
This was an IPO with only Canadian assets in medical office buildings that catered to healthcare tenants. There has recently been a transaction where this company and NorthWest Health Care International are now coming together. This is probably the reason for all the volatility in shares recently. The Canadian entity has been poor over the last few years because suburban office in Canada has struggled in terms of attracting tenants. Cash flow has been relatively weak. Although the growth prospects might look greater, he also thinks the risks increase.