TSX:AAR.UN - Post by User
Post by
bopaon Aug 04, 2017 12:15pm
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Post# 26548010
Scotia view on earnings
Scotia view on earningsPure Industrial REIT (AAR.UN-T; C$6.39; SO) Home Field in Focus with $365M of Core CDN Acquisitions
OUR TAKE: Maintaining SO, $6.75 target. We’re off restriction post AAR’s $230M equity raise (36M units at $6.40/unit). Proceeds will be used to fund acquisitions, incl. $365M of CDN assets at a 5.2% cap rate ($192/sf). Although we estimate limited accretion, the properties appear to be strong core market additions (incl. significant GTA weighting) that should ultimately bolster cash flow quality and durability. Our AFFOPU estimates came down a bit, though our NAVPU rose 7% on cap rate compression. Our 7% AFFOPU CAGR ranks well above its CDN peers, with a full update post Q2 results on Aug. 9 (our Q2/17E FFOPU of $0.10 is in line with Street). The units are trading at 16.5x NTM AFFO/5.8% implied cap rate/at NAV (Exhibit 1). At current levels, we continue to see an attractive entry into a name well equipped for a steeper yield curve via superior growth, with below-average leverage and improving portfolio quality.