TSX:HOM.DB.U - Post by User
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incomedreamer11on Aug 10, 2022 8:51am
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Post# 34884098
Scotia comments on result
Scotia comments on result
Q2 Glance: In Line Q; 2022 SS NOI Growth Guidance Raised; NAV Up 1.7% Q/Q
OUR TAKE: Slightly Positive. After beats in last two quarters, Q2/22 FFOPU came in line with Scotia and consensus estimate. IFRS NAVPU increased 1.7% q/q to $22.35 (from $21.98 last quarter) – IFRS cap rate was unchanged at 3.9% q/q. 2022 FFOPU guidance was reiterated, although SS NOI growth guidance was revised higher to 13% vs 12% previously. 2022 FFOPU guidance (at mid-point) at $0.88 vs Scotia estimate of $0.865 and consensus estimate of $0.86.
BSR is now trading at ~27% discount to IFRS NAVPU. Current valuation does not reconcile with results, which continue to look good. Full update post conference call tomorrow @ 11 a.m. EST.
In line quarter (after two beats): Q2 FFOPU came in at $0.207 vs Scotia estimate of $0.208 and consensus estimate of $0.210. NOI came in slightly ahead of Scotia estimate, offset by higher interest expense. Reported AFFOPU was up ~27% y/y in Q2.
Strong 2022 guidance reiterated despite equity issuance in Q2/22: FFOPU (at mid-point) guidance of $0.88 implies +48% y/y growth, versus Scotia estimate of $0.865 and consensus estimate of $0.86.
IFRS NAVPU came in at $22.35 vs $21.98 last quarter (up 1.7% q/q) while cap rate was unchanged at 3.9% q/q: So far in the reporting season, we have not seen much changes to IFRS cap rates on a sequential basis. Small FV gains this quarter was due to slightly higher NOI assumptions.
SP NOI up 16.7% y/y in Q2/22 vs +16.3% in Q1/22 (2022 mid-point guidance now at 13% vs 12% previously): SP NOI growth was driven by 12.5% y/y growth in rental rates while SP occupancy decreased 80bp y/y. NOI margin grew 280bp y/y. Portfolio occupancy at 95.0% (up 50bp q/q). Focus has been on rental rate growth (over occupancy gains).
Rental rate acceleration continued in Q2/22 – tougher comps from Q3/22: See Exhibit 1 and 2 – strong numbers. Q2 was similar to Q1/22 and July is tracking strong as well – although slight deceleration due to tough comps.
Balance sheet and acquisition activity: In late April’22, BSR completed $115M equity offering @ $19.55/unit. Proceeds were used to pay down credit facility, thus leverage was reduced significantly to 36.2% (from 43.2% as of Q1/22). No new acquisitions announced in 2022 so far. BSR announced agreement to jointly develop 238 apartment unit in Austin – expected to be completed in 2024. This is the first time BSR has ventured into development – will look for more colour on the call.
Weighted average cost of debt at 3.4% p.a. (vs 2.8% last q and vs 3.4% last year). Main reason for the noticeable increase here was due to variable rate exposure, only 61% of total debt is fixed as of Q2/22. However, in July 2022 BSR entered into an interest rate swap agreement on a notional value of $280M to fix the rest of the variable debt. Hence, 100% of BSR’s debt will be fixed @ 3.4% following the swap agreement.