Outperform =====
Mr. Avalos thinks Sienna Senior Living Inc.'s (SIA-T) “strong” business fundamentals sit “detached” from its current stock price, leading him to raise his rating to “outperform” from “market perform.”
"Sienna’s business continues to show strength, with solid SPNOI growth out of both the LTC [long-term care] and RR [retirement residence] segments," he said. "While we wouldn’t expect growth to continue to 2Q18’s rate, it should still lead the healthcare sector. Along with a much-improved balance sheet, a dividend increase and a year-to-date 10-per-cent drop in the stock (versus a 5-per-cent increase for the Capped REIT Index), these reasons justify upgrading Sienna."
On Wednesday, Markham, Ont.-based Sienna reported funds from operations per share for the second quarter of 37 cents, a rise of 13 per cent year over year and 3 cents above the forecast of both Mr. Avalos and the Street. The beat was due largely to higher margins and lower interest.
The company also raised its monthly dividend for the first time since August of 2012 to 7.65 cents from 7.5 cents.
Mr. Avalos's target for the stock is $19, which is 14 cents less than the consensus.
Elsewhere, CIBC World Markets' Chris Couprie upgraded Sienna to "outperformer" from "neutral" with a $19 target.
Mr. Couprie said: “Sienna is a strong operator with margins and health care quality metrics that outperform peers. Recent softness in the shares, we believe, was a function of mixed Q1 results, and headline risks surrounding a recently filed statement of claim (which we believe will have little financial impact). With solid Q2 results and the combination of the stock trading near trough absolute and relative P/NAV [price-to-net asset value] valuation levels, and a 5.4-per-cent yield, the total return potential is attractive for this solid operator.”
=====