Multiple Raised Targets National Bank Financial analyst Matt Kornack called the fourth-quarter 2023 financial results from First Capital Real Estate Investment Trust “a solid end to the year as retail fundamentals remained supportive of continued rent spread expansion, despite some fixed rate renewals.”
The Toronto-based REIT reported funds from operations of 27 cents for the quarter, down from 37 cents during the same period a year ago. However, adjusted for recoveries and termination income, it came in at 32 cents, a penny above Mr. Kornack’s estimate and 2 cents above the Street’s expectations.
Total occupancy rose 0.3 per cent sequentially and 0.4 per cent year-over-year to 96.2 per cent, topping the analyst’s projection of $96.0 per cent. Both headline net operating income and EBITDA also narrowly beat the Street’s forecast.
“The REIT’s capital allocation plan, with a focus on low cap rate dispositions and de-leveraging has aided near-term FFO/unit figures (a positive differentiator vs. peers with larger development delivery schedules),” said Mr. Kornack. “Our outlook for growth in 2024 on a per-unit basis remains constructive on the back of further accretive disposition activity, lease-up at One Bloor and sustained occupancy/rent growth trajectories.”
Reiterating his “outperform” recommendation, he raised his target for First Capital units to $17.50 from $17. The average is $17.25.
Elsewhere, TD Securities’ Sam Damiani downgraded the shares to “buy” from “action list buy” with a $19 target.
Other analyst changes include:
* Scotia’s Mario Saric to $17.25 from $16.50 with a “sector perform” rating.
“FCR is trending positively, with the main question = has enough been priced in for now? (FCR implied cap spread to its unsecured debt YTM is below average; that said, it was essentially 0 at Q3 results as the debt YTM has fallen 110 basis points!),” he said.
* RBC’s Pammi Bir to $19 from $17 with an “outperform” rating
* CIBC’s Dean Wilkinson to $19 from $17 with an “outperformer” rating.