TSX:NWH.DB.G - Post by User
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incomedreamer11on Aug 14, 2023 10:26am
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Post# 35586893
Scotia comments on results
Scotia comments on results
Tough Results Continue as Focus Shifts to Strategic Review
OUR TAKE: Mixed. Reported FFOPU of $0.13. Ex. $8M of reversed project and acquisition fees and cost reimbursements pertaining to the terminated U.K. JV, we est. recurring FFOPU of $0.15 fell 5% q/q and 21% y/y from $0.19 (Q1 = fell 5% q/q; 2022A = -12%), below our $0.17 and consensus $0.18 estimate (range = $0.17-$0.19). The quarter is the 5th consecutive that has come in below street expectations.
Overall, no major progress on capital recycling initiatives as it pertains to the UK and US JV syndications, resulting in elevated financial leverage (debt/GBV of ~58%, up q/q on a large FV loss).
NWH declared an unchanged distribution for August. Distribution sustainability was a focus on the 10:00 am conference call, to which NWH noted it will be reviewed amongst other items as part of the Strategic Review.
Recall NWH announced the commencement of a formal strategic review in order to surface value (see our note).
Our rating and estimates are intact ahead of the commencement of the announced Strategic Review
Capital recycling update. It was a fairly quiet quarter (for NWH standards). It has sold A$67M of AUFM units to date (consistent with July 10th litigation settlement announcement). It continues to review strategic alternatives for its U.K. portfolio sale (recall, previous ~$275M JV was terminated on June 21, 2023); portfolio SSNOI was +4.6% y/y in local currency. NWH noted $93M of dispositions are under LOI, bringing the total to $167M (vs. its announced target of $340M).
Disclosed IFRS NAVPU fell $0.61 q/q (-4.6%) to $12.55 (Q1 also fell 4.6% q/q) on a $140M FV loss (Q1 = $152M FV loss) and $103M f/x loss ($96M loss at Vital Trust, offset by $11M gain Americas and $13M gain Europe; Q1 = $13M f/x loss; -$51M Vital Trust, +$30M American and +$11M Europe); cap rate rose 14bp q/q to 5.6% (Q1 = rose 10bp q/q) vs. our 5.7%.
Operational update: SPNOI in local currency rose 2.9% y/y (Q1/23 = +3.6%), and rose 5.1% in CAD (Q1 = 4.4%). Occupancy fell ~100bp q/q 96% (Q1 = flat at 97%). We could not find disclosed NWH rent coverage from its hospital tenants (Q4 = 2.3x EBITDAR). WALE fell 0.1 q/q to 13.5 years (Q1 = -0.2 q/q), still the highest in our universe.
Asset management update. Reported total proportionate asset management fees fell a material $17M q/q to $1M (Q1 = rose $9.4M q/q to $18.5M), well below our $15M forecast. We estimate a total ~$8M of fee reversals resulting from the terminated UK JV impacted the results (i.e., reversed acquisition and other fees, as well as cost reimbursements). Setting aside the reversals, results still came in below our forecast on lower acquisition and project fees (base fees were in-line). We note these fees can show substantial q/q variability. Base fees fell $0.2Mq/q to $8.2M (Q1 = +$0.6M q/q). Total AUM of $11.5B was flat q/q (Q1 = flat), including $4.8B of available capacity (+$0.2B q/q; Q1 = +$0.1B q/q).
Please see Page 2 for Balance Sheet and Liquidity Update
Q2 liquidity fell $8M q/q to $68M (Q1 = fell $135M q/q) with NWH disclosed proportionate debt/GBV up 800bp q/q to 58% (Q1 = down 610bp q/q to 50%; 56.1% at the start of 2022). Post-Q, NWH’s liquidity increased $175M with a new $50M N/R facility and a 1Y extension of its $125M unsecured facility to Nov/2024. NWH also refinanced $70M of term debt maturing Sep/2023 by 4 years. In total, NWH refinanced 91% (Q1 = 76%) of its 2023 debt maturities, reducing its floating rate exposure by ~200bp q/q to 34% from 36% (w.a. interest rate = 5.1%; Q4 = 4.7%).