Sienna Senior Living Inc T.SIA

Scotia comments on result

[incomedreamer11]

Dividend Yield ~8%... Once Again Get Paid While You Wait

OUR TAKE: Neutral. SIA has outperformed CSH by 11pt since Q2 results. Post our model update, SIA dividend yield is 7.9% at 94% 2023 payout ratio versus CSH distribution yield at 7.3% at 107% 2023 payout ratio. In our CSH note (link; Sector Perform), we mentioned that we might have to keep patience for a few months although valuation looks attractive. For SIA, we mention that the dividend yield looks attractive (and more sustainable) and investors are getting paid while they wait for the sector occupancy and margin recovery.

As highlighted previously, the Seniors Housing Playbook is ‘one year at a time’ – i.e., public markets focus on FY1 earnings and not beyond that. If we calculate NAV purely based on 2023 NOI estimates, our CSH NAV is $8.00 and SIA NAV is $14.14. However, once the market starts focusing on 2024 estimates, both names show meaningful upside (i.e., CSH NAV jumps to $10.75 and SIA at $15.07, implying ~30% upside). See Exhibits 1 and 2.

Exhibits 12 & 13 – we provide detailed side-by-side comparison of CSH vs. SIA on various parameters including portfolio and valuation.

KEY POINTS

Focus has shifted to NOI margins as a lot has been achieved on RH occupancy front. SIA on the conf call emphasized a number of times about labour shortage and costs inflation on a number of fronts. Previously, SIA was expecting 50bp RH NOI margin improvement in H2/22 from Q2/22 but now expects NOI margin to be largely flat. We are expecting 50bp y/y improvement in 2023 (much slower ramp-up) as we are seeing that costs pressures are likely to linger through H1/23. On the RH occupancy side, we have said earlier that SIA has been impressive. RH occupancy has already reached 88-89% level and not far to get into the 90s. There is still opportunity to ramp up occupancy on the acquisition portfolio.

LTC – Policy changes (although impact unknown). Ministry intends to gradually reduce funding as it is not planning to reopen 3rd and 4th bed in multi-bed rooms – this could be gradual during the period starting on January 1, 2023, until March 31, 2025. SIA has ~350 3rd and 4th beds in ON and there will be some impact (not quantified so far). We have not reflected this in our model yet.

Our 2023E AFFOPS is reduced by 14% and implies 5.7% y/y growth. We have reduced our NOI margins for both RH and LTC and largely kept RH occupancy flattish into 2023. Our NAVPS is reduced to $14.10 and accordingly our target is reduced to $14.00 (-$2.00).

[dogatcat]

I buy every month and I like to see the price drops like today.  This is like buying a bond that will eventually always return to its' previous price.   $15 NAV is conserative for Sienna.  This will return to $17 and above in the next 2-3 years.   Democgraphics alon will force this re-evaluation.  

[ManitobaCanuck]

100% agree. Let em retirees n fixed income dudes sell this for crazy GICs . 8% eligible dividend( taxed at 36%)  is juicy whereas GICS pay 5.1% ( and taxed at 53%) . Life if good , if u have 600k in this and u get 50k yearly in dividends . Pumping profits from my oilstock winnings in this ... 

[ANALOG GUY]

36% tax on Canadian dividends? where the heck you live? each province is different but Albertan's pay 10.16% total tax on Canadian dividends (if you're income is less than $100k) google " 2022 marginal tax rates" and pick your province   

[ManitobaCanuck]

WINTERpeg ,ManiSNOWba .Lol Investors in the highest tax bracket pay tax of 37.7% on eligible dividends in Manitoba , compared to about 53% on interest income. Investors in the highest tax bracket pay tax on capital gains at a rate of roughly 27%.

[ANALOG GUY]

Holy Cow Batman Manitoba has high tax rates  plus you got that what you call it ------ a sales tax? good thing your electricity is so cheap! 

[dogatcat]

Manitoba is a socialists paradise.  

[ManitobaCanuck]

Exactly , Lots of freeloaders here who survive on benefits ....... Need to get out of here ASAP