Scotia Capital Even the skeptics are climbing on board. GLTA
Scotia Capital analyst Mario Saric thinks there’s “still some gas left in the tank” forBoardwalk REIT, raising his financial forecast following in-line second-quarter results that he saw as a “slight positive.”
“BEI is maximizing occupancy, even if it means moderating rent growth (on both new and renewal leases) as a big improvement in market demand increases a focus on ‘self-regulation’ (as a means of limiting regulatory risk, in our view; question is whether competitors will follow),” he said. “BEI believes Edmonton (35 per cent of Q2 NOI) is its strongest market on the margin (given still affordable rent; $1,282/suite vs. $1,326/suite portfolio avg.) and believes the recovery is only in the ‘early innings’.”
“BEI occupancy is near-max, driving near-record sequential revenue growth, accelerated incentive burn-off, and a 3-per-cent uptick in 2023 FFOPU [funds from operations per unit] guide. That said, the biggest positive change for us is the 4-per-cent upward revision to 2024 FFOPU as it dampens a prior risk; a possible significant deceleration in FFOPU growth.”
Mr. Saric is now expecting year-over-year FFOPU growth of 10.1 per cent in 2024, down from his 2023 estimate of 11.6 per cent versus peer averages of 10.3 per cent and 2.9 per cent.
“We see lower risk of outflows into peers as investors shift focus to 2024 earnings in the fall, though decelerating rent growth should remain on the radar,” he said.
“Overall, while growth is showing signs of decelerating (year-over-year comps getting tougher + rent growth moderating), double-digit FFOPU growth + guidance exceeding in-place consensus supports a higher unit price.”
With higher revenue projections, Mr. Saric hiked his target for Boardwalk units to $76 from $70, keeping a “sector perform” recommendation. The average is $74.23.