TD note post CC Don't say I understand this TD analyst logic. Maybe is his junior associate doing the mental math. Following sep qtr, took up 2023 AFFO by 10 percent and 2024/2025 by 5 percent. Also took NAV up to $9.10 per share (from $8.90). After q4 results, takes up 2024/2025 AFFO goes up another 4-5 percent and NAV up to $9.30 .
moreover, states that cdn peers trade at just 8 percent discount to NAV and US peers trade at "26% premium" to NAV, yet content that EXE at a 23 % discount to NAV. And since October 2023, price to NAV discounts have been narrowing.
EXE trading at 11.6x 2024 AFFO vs peer group at a whopping 16.1x.
Lazy analysis below which just parrots the cc and reiterates conclusion from last quarter. No insight into why EXE should deserve a narrowing discount due to higher return profile going forward due to changing mix , strong demand and balance sheet optionality. Just the same old lazy pablum.
here is the note, for what it is worth, which has the title , "Extendicare's Key Segments on Solid Footing':
Impact: SLIGHTLY POSITIVE
Extendicare reported better-than-expected Q4/23 results, which reflected the first full
quarter of the Revera and Axium transactions. This was most notable in the managed
services segment, where both revenue and NOI nearly doubled y/y. With these
strategic transactions now closed, management is turning its focus towards driving
organic growth through its managed services segment and its LTC redevelopment
program (Exhibit 3).
Extendicare's balance sheet remains in good shape, with management pointing to
the possibility of opportunistic acquisitions. Management noted that some smaller
LTC operators are looking for scale/efficiency, given inflationary pressure, which in
turn could lead to future acquisition opportunities.
Home Health Care ADV volumes improved for the fifth consecutive quarter and
were up +10.2% y/y and +2.8% q/q to 28,158. Excluding a one-time revenue catch-
up, margins were +220bps y/y and +20bps q/q to 8.8% (albeit slightly below our
estimate). Management noted that there still remains a wide gap on the demand side
(25% of referrals are turned down), and expects its recruiting and retention programs
to drive further capacity growth going forward. We also expect that the 6.8% rate
increase (on top of the 3% received earlier this year) will help drive further growth
in capacity. Overall, management expects to outpace the 4% industry growth
rate in near-to-medium term.
On LTC, management is cautiously optimistic that the Ontario budget (released
later this month) will include a catch-up in operational funding to help bridge the
gap between current costs and inflation. Should this occur, it should also improve
economics for some LTC redevelopment projects, in our view.
Forecasts. Our 2024/2025 AFFO/share estimates increase 4-5% on higher NOI,
partially offset by higher interest expense. Our NAV/unit estimate is +2% to $9.30
on higher NOI.
TD Investment Conclusion
Extendicare has now delivered two consecutive quarters of solid financial
performance. That said, given recent uneven earnings performance in previous
quarters, we are waiting to see sustained earnings growth momentum before we
get more constructive on our rating. We are maintaining our HOLD rating and
increasing our target price to $7.50.