GREY:MSTUF - Post by User
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retiredcfon May 11, 2016 8:56am
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Post# 24861190
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Milestone Delivers Another Quarter Of Texas-sized Growth
What's Changed
Milestone's reported FFO of $19.4 mln. ($0.25/unit, or $0.29 excluding the impact of one-time mortgage prepayment and non- cash expenses) compared to $16.4 mln. ($0.27/unit) in Q1/15 and our $19.6 mln. ($0.28/unit) estimate. MST's reported AFFO of $0.24/unit was slightly above our $0.23/unit estimate. Results were driven by +7.9% SP-NOI growth, boosted by +5.5% SP-revenue growth and higher total NOI margins of 57.1%, up 220 bps from Q1/15. Average Q1/16 occupancy was 95.4%, down 40 bps Y/Y. Average occupied monthly rent/suite increased to $917 in Q1/16, up from $879 in Q4/15 and $820 at Q1/15. SP-rents increased from an average of $830 in Q1/15 to $883 in Q1/16.
In January, MST completed the Landmark acquisition with Starwood Capital, acquiring 15 residential properties for $493.5 mln. at a cap rate of 6.1%. In January, MST sold four residential properties in Houston, Atlanta, and DFW for gross proceeds of $111.0 mln. Subsequent to the quarter, MST acquired a 295-unit multi-family apartment property in Dallas for $34.0 mln. at a cap rate of 6.7%.
D/GBV assets was 49.9% at Q1/16, down from 51.6% in Q1/15 and below the REIT's limit of 60.0%. MST's cash balance was $21.0 mln.
Implications
Our 2016E FFO and AFFO estimates are $1.15/unit and 1.04/unit, respectively, from $1.18 and $1.00 based on the results in the quarter. Likewise, our 2017E FFO and AFFO estimates increase to $1.25/unit and $1.12/unit, respectively, from $1.24 and $1.09. Our NAV estimate increases to $15.00/unit (from $14.00/unit) at a 6.25% cap rate (from 6.40%) to reflect recent market transactions impacted by rising demand for high-quality apartment properties.
Valuation
At C$18.00, Milestone trades at ~12.1x our 2016E FFO (F/X adjusted), an 8% discount to our C$20.00/unit FX-adjusted NAV estimate (from C$18.50), and yields 4.0%. Our 12- to 18-month price target is C$20.00 (from C$18.50) or ~13.0x-13.5x 2016E FFO (F/X adjusted). We rate Milestone Sector Outperformer.