TSX:MRT.DB.A - Post by User
Post by
incomedreamer11on Jul 29, 2022 8:48am
390 Views
Post# 34859514
TD comments
TD commentsEvent Q2/22 results and forecast update.
Impact: NEUTRAL
FFO/unit (f.d.) of $0.22 was -7% versus Q2/21, but in line with our estimate/ consensus. AFFO/unit of $0.15 was also in line. The quarter benefited from $0.8mm of lease cancellation income, which was partially offset by $0.3mm of bad debt expense (nil forecast). Q2 SPNOI was +3.8% y/y and represents the fifth consecutive quarter of growth.
The Retail portfolio delivered another good quarter on the SPNOI front at +10.6% (fifth consecutive positive print), including 15.3% for enclosed retail, driven by gains in the Western Canadian portfolio.
Office portfolio SPNOI was -3.1%, as an ~15% decline in the multi-tenant office portfolio more than offset single/dual tenant office, which was effectively flat. Portfolio occupancy was -30bps q/q at 90.9% (-20bps y/y), as a 60bps decline in office to 86.6% was partially offset by retail, which held in at 94.0%. Bad debts trended down once again this quarter to just $0.3mm, versus $0.6mm in Q1/22. In spite of the broader macro uncertainty, we expect the retail portfolio (particularly enclosed malls) to continue to benefit from a return to pre-pandemic shopping habits, which is benefiting leasing velocity, although the REIT will begin lapping tougher comps in the coming quarters.
On the office front, we anticipate continued earnings volatility owing to both the shift to hybrid working models (which is disproportionately impacting older commoditized office assets such as MRT's), as well as the impact of a potential economic slowdown.
Forecast.
Our 2022 AFFO/unit estimates are largely unchanged following an in line quarter, while 2023 declines slightly to reflect the impact of a potential economic slowdown on the REIT's portfolio. We are also introducing our 2024 estimates. We expect average annual growth of ~1% in 2023/24. Our $8.40 NAV/unit estimate is unchanged.
TD Investment Conclusion Although operations appear to be stabilizing, we do not see any meaningful near-term catalysts that would help close the valuation gap versus its peers and believe Morguard could be disproportionately negatively impacted by an economic slowdown. We are maintaining our HOLD recommendation and $5.50 target price.