Canaccord Upgrade Canaccord Genuity analyst Mark Rothschild raised his target price for shares of Brookfield Property Partners LP(BPY-Q, BPY.UN-T) in reaction the announcement of its intention to launch a Substantial Issuer Bid to repurchase up to $500-million of BPY units and Class A shares of Brookfield Property REIT Inc.
"BPY's unit price performance has been weak, and the recent GGP acquisition led to a further decline in 2018," he said. "While there has been some improvement over the past month, the price remained well below NAV [net asset value]. Although we view BPY as a high-quality portfolio led by a strong management team, in the past there had been little urgency from management to improve the valuation, and we struggled with identifying what could move the unit price materially higher, outside of a major buyback. Therefore, we view BPY's announcements very positively."
Maintaining a "buy" rating, Mr. Rothschild increased his target to US$22.75 from US$20. The average is US$23.06.
"BPY owns an extremely high-quality portfolio of properties and we believe that it is well-positioned to create meaningful value over the long term through the completion of its current active development and redevelopment projects," the analyst said. "While retail sentiment remains negative, management appears to be taking some steps to improve the valuation through a substantial issuer bid. We are raising our target price to US$22.75, which equates to a 10-per-cent discount to NAV. The more modest discount (was 20 per cent previously) reflects our belief that investors should view both the strong financial results as well as the SIB positively. Importantly, management has indicated that it will take advantage of the discount valuation and purchase units, which should lead to an increase in NAV."