TSX:HOT.DB.V - Post by User
Post by
bodiggityon Aug 17, 2019 1:09pm
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Post# 30039685
TD reaffirms $6.50US target price
TD reaffirms $6.50US target price Event AHIP reported Q2/19 FFO/unit (f.d.) of $0.23, flat vs. Q2/18 and in line with our estimate and consensus. AFFO/unit (our calculation) of $0.19 was also in line with our estimate. Effective with this report, we are transferring lead coverage from Jonathan Kelcher to Lorne Kalmar.
Disposition of Economy Hotels/Capital Recycling. Management continues to target the redeployment of proceeds by year-end, and expects to acquire premium branded properties in the $150,000-$180,000 door range with RevPAR of +/-$100. Following the disposition announcement, the REIT has seen a significant pick-up in in-bound calls, and continues to evaluate both portfolios and single asset acquisition opportunities. We are modelling $67 million of acquisitions in Q4/19 and $133 million in H1/20. PIPs. AHIP continues to make solid progress on its PIP renovations, with most projects coming in on time and on/under-budget. Management expects Q2 to be affected the most (~$0.014 of FFO/unit impact), given the number of larger properties that went through the program in the quarter. The budget for the rest of the year is $2+ million. We expect an update on the 2020 PIP program with Q3 results. Properties renovated in Q2/18 generated ~21% SPNOI growth in Q2/19. Outlook for Premium Branded. On a stabilized basis (i.e., following the completion of the PIP program), management expects the portfolio to slightly outperform its competitive set owing to the fact that the portfolio will be newly renovated. Introducing 2021 Forecast. Our 2019/20 AFFO/unit estimates decline slightly to account for the disposition and timing of the redeployment of proceeds. We are forecasting ~8% average annual AFFO/unit growth through 2021. Our NAV/unit estimate declines 3% to $7.40.
TD Investment Conclusion We believe that the decision to focus exclusively on higher growth, higher quality branded hotels should be positive for the stock's valuation, particularly if management is able to accretively redeploy the proceeds in a timely manner and complete its PIP program on time and within budget. We are maintaining our BUY recommendation and $6.50US target price.