TSX:FCR.UN - Post by User
Post by
retiredcfon May 04, 2023 10:36am
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Post# 35429896
TD
TD First Capital REIT
(FCR.UN-T) C$15.61
Deleveraging Paused in Q1/23, While SPNOI Growth Accelerated
Event
Post-Q1/23 outlook update. Initial views here.
Impact: NEUTRAL
Enhanced capital-allocation plan: FCR's progress remains at 36% on executing the $1bln+ disposition plan, as was announced early last month. Management is not seeing any inability for buyers to finance their acquisitions in today's environment, and reiterated its confidence in completing the planned dispositions of mostly development sites.
FCR's total liquidity (including construction facilities) increased to $1.1bln, and stands to grow further as dispositions are completed in the near term. We expect this to serve FCR well in the current environment, including by providing optionality in dealing with debt maturities (e.g. a $300mm debenture due Q4/23).
Development capex plans were dialed back by $50mm to a range of $150mm- $175mm, due to delays in some planned construction start dates. This will help with FCR's leverage-reduction objectives, particularly given the $20mm invested in the NCIB year-to-date.
NAV revision: We revised our NAV/unit 3% lower to $21.00 (now 11% below the $23.48 IFRS NAV) on a 16bps increase in the average cap rate.
Forecast revision: We lowered our 2023/2024 AFFO/unit estimates marginally, now reflecting a three-year CAGR of 5%, vs 6% previously. We forecast an AFFO payout ratio of 83% in 2023 and 78% in 2024. We expect the temporary downtime at the Yonge/Bloor Nordstrom Rack and Westmount Shopping Centre Walmart spaces later this year to partially offset the strong positive absorption that has been occurring throughout the portfolio.
TD Investment Conclusion
At 15.0x 2023E P/AFFO, 74% P/NAV, and 66% P/IFRS-NAV (two closest peers: 14.0x/82%/77%), we view FCR's current absolute and relative valuations as excessively discounted and poised for a recovery, as the REIT continues its progress on disposing of low- and no-yielding properties and reducing balance sheet leverage. We reiterate our ACTION LIST BUY rating with a lowered target price of $21.00.