TSX:TCN - Post Discussion
Post by
retiredcf on Apr 05, 2023 9:37am
TD (Serious Bargain)
Tricon Residential Inc. (TCN-N, TCN-T) US$7.71 | C$10.38
Tricon 2023 Investor Day Highlights
Event
Tricon's California investor day.
Impact: SLIGHTLY POSITIVE
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12-Month Target Price: US$11.50 |
12-Month Dividend (Est.): US$0.23 |
12-Month Total Return: 52.1% |
The investor day included detailed presentations, as well as tours of Tricon's SFR operations. Although no material updates were provided, we did come away impressed with the operations and with increased confidence on long-term NOI growth outlook. |
The operations tour included demonstrations of how TCN is using scalable technology to improve its overall operating platform - from smart routing for field repairs to using the Alexa app to describe home features on a self-tour. Given its years of "clean" data in its systems, management expects AI and machine learning to eventually help predict equipment failures, skips, resident move-outs, renovation scopes, etc., leading to better overall forecasting/scheduling.
SFR fundamentals remain robust, and we are confident that TCN can hit its SPNOI guidance of +6.0-7.5%. Management estimates a 15% rental rate mark-to- market, giving good visibility on revenue growth. Leading demand indicators dipped y/y in Q4/22; however, they rebounded nicely in February, with monthly leads per available home +14% y/y, while applications are flat y/y. Rental supply in TCN's markets has increased steadily since the Q2/21 low and is largely back to pre- pandemic levels. Management is budgeting an 8% increase in property taxes in 2023 (property taxes are ~50% of overall costs), although this number could be lower depending on millage rates. On its controllable costs, management expects mid- single-digit expense growth.
Debt. For 2023 maturities, Tricon has extended its $220mm term loan and expects to repay its $163mm subscription line with equity calls from its JV partners. The $358mm 2024 maturity is expected to be refinanced with a new securitization, although the company has arranged a 1-2 year extension should the securitization market be closed. Management noted that the securitization market is currently available, but investors are looking for lower LTVs (sub 60%). Life-insurance companies remain active in the SFR space (TCN completed a Q1/23 deal with a life- co for six years, 5.95%, 60% LTV).
Valuation. TCN is currently trading at a 45% discount to our $14.10 estimated NAV and 6.9% implied cap rate. Versus its book value, TCN is trading at 0.6x (long-term average 1.1x).
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