TSX:KMP.UN - Post by User
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retiredcfon Nov 07, 2024 8:16am
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Post# 36300525
TD
TDHave a $23.00 target. GLTA
Q3/24: RESULTS IN LINE. 2.9% DISTRIBUTION BUMP AND SOLID 2025 OUTLOOK
THE TD COWEN INSIGHT
Q3 results were in line with our expectations/consensus and highlighted by strong apartment SPNOI growth of 7.9% and a 2.9% distribution bump. KMP is on pace to meet/ exceed its 2024 strategic targets and provided a favourable high-level outlook for 2025 with the Atlantic Canada portfolio expected to outperform.
Impact: NEUTRAL
Q3 Results. FFO/unit (f.d.) of $0.33 was +2% y/y and in line with our estimate/consensus.
AFFO/unit (our calculation) of $0.28 was also in line with our estimate. Killam also announced a 2.9% increase in its annual distribution (to $0.72/unit) effective November.
We View Management's Initial 2025 High Level Outlook Favourably. Management anticipates continued strong, though slightly moderating top line growth with Atlantic Canada expected to lead. Expense growth should be 2%-4% (pressure on prop. tax) and additional margin expansion is expected (aided by sales of lower margin props). Targeting asset sales of $100-$150mm annually.
Q3/24 Operating Highlights
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Apartment SPNOI (~87% of SPNOI) growth was +7.9% with revenue growth of 6.3% offset by 2.7% growth in operating expenses. SPNOI growth was positive in every region except PEI (-0.6% on higher prop taxes) with standouts being Alberta (+10.4%) and Halifax (+8.6%). Strong AMR growth +7.2% was slightly offset by a 50 bps decline in occupancy to 97.9% (Calgary down 750bps y/y owing to directly competing new supply). Apartment SPNOI margin was +100bps y/y to 69.0%.
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MHC SPNOI (8% of NOI) growth was +4.1% (flat expenses and +2.8% revenue growth), while Commercial (5%) SPNOI growth was +5.1% (increased rates on renewals and higher percentage rents).
Capital Recycling / Developments
YTD (incl. post Q3) asset sales total $47.7mm (288 units). With additional Q4 planned dispositions, management remains on track to meet its 2024 target of $50mm in asset sales. Leasing at Nolan Hill Phase II (completed in Dec/23) is also progressing well with the development currently 88% leased versus 76% as of Q2. Along with Civic 66 and The Governor (both fully leased), new developments are expected to contribute $0.03/unit to FFO/unit in 2025.
Balance Sheet
Leverage (D/GBV) was -50bps q/q to 40.7%, representing another all-time low. Recorded an IFRS FV gain of $51.3mm on higher NOI (cap rates steady q/q). Refinanced $102.4mm of maturing mortgages with $128.7mm of new debt (WAIR of 4.34% vs. 2.58% on maturing mortgages).
Conference call Nov. 7 at 9:00 AM (1-888-664-6392,