Boardwalk Real Estate Investment Trust T.BEI.UN

TD's Upgrading to ACTION LIST BUY from Buy; Q2/21 Results

[ace1mccoy]

Event

Q2/21 results, ratings change and forecast update.

Impact: POSITIVE
 

We are upgrading Boardwalk to ACTION LIST BUY. We believe that Boardwalk's

valuation is compelling at current levels. The REIT is trading at $152,000/suite and

an implied cap rate of 5.3%. That compares with its closest peers at $285,000/suite

and ~3.9% implied cap rate. The current implied price/suite is also well below the

~$175,600/suite that Avenue Living recently paid for a portfolio of 1,566 Edmonton

suites, which we view as lower quality assets than Boardwalk's Edmonton portfolio.

We are also seeing a good recovery in fundamentals in its core markets, which

should begin to drive strong earnings growth. Looking ahead, we anticipate further

occupancy gains in H2/21 as young professionals seek apartments, postsecondary in-person learning resumes, and immigration picks up. The REIT's

relative valuation and improving outlook are the key catalysts to our rating

upgrade.
 

Q2/21 Results Summary. FFO/unit (f.d.) was $0.75, +5% vs. Q2/20, and largely in

line with our estimate/consensus of $0.74. AFFO/unit (our calculation) of $0.58 was

also largely in line (TDS: $0.57).
 

Guidance. Boardwalk reintroduced financial guidance for the first time since the

onset of the pandemic. Management expects to achieve SPNOI growth of 0% to 4%

in H2/21, which implies a -2.0%-to-+1.0% range for F2021 (TDS forecast: +0.8%).

Additionally, Boardwalk forecasts FFO/unit of $2.80 to $2.92, which compares

favourably with our previous estimate/consensus of $2.81. Our revised FFO/unit

estimate of $2.87 is near the mid-point of management's guidance.
 

Management will host a conference call this morning at 11:00 a.m. EST (dialin: 1-888-664-6383; passcode: 97624649).
 

Forecast. Our 2021/2022 AFFO/unit estimates are ~4% higher on increased NOI

assumptions and lower interest costs. Our $54.30 NAV/unit estimate is +10%.

TD Investment Conclusion
Boardwalk has now delivered 10 consecutive quarters meeting/exceeding Street

earnings expectations, and we anticipate improving fundamentals in H2/21 and into

2022. Furthermore, we view Boardwalk as attractively valued on a P/NAV, P/AFFO,

and price/suite basis vs. its peers. We are increasing our target price to $59.00

from $52.00 and our rating to ACTION LIST BUY.

[autofocus111]

I am maintaining an Action List HOLD rating on BEI until they increase the dividend.

[malx1]

Share price up 30%+ since you've been criticizing low payout.  Worrying about a 3% dividend while missing the capital appreciation is being penny wise pound foolish.  Every day that goes buy is opportunity for you to switch to high yield reit.  Yet here you are, more whining as you hold BEI.  Comedy show.

[ace1mccoy]

Well , alrighty then but "Total Return" is best with all things considered ...  Best wishes to you auto  in your investing goals.

[autofocus111]

Looks like Mr. Market is not buying TD's story.

[malx1]

Share price has travelled from $28 to $48 in less than a year.  Many here continue to miss the big picture here while whining about size of dividend. At $50 sp the 2% annualized dividend will deflect away novice reit speculators. I genuinely hope they reduce distribution.

[autofocus111]

Yeah like nothing else has doubled in the last year. Zoom out the chart buddy.

[malx1]

A double on a low-risk investment is much different than a triple on a levered high-risk moose pasture name. You could learn a few things about risk adjusted returns. $3 in FFO means 20x ffo gets a $60 target.  Is TD off the mark?  Well, I'd listen to their team of CFA's before I'd put any weight into your whining.  You don't seem to be able to grasp reit basics

[malx1]

Management set out on journey to build NAV rather than pay shareholders.  That was announced the end of 2017.  If you spent your time reading bei's MD&A rather than stockhouse message boards, you'd know that the low distribution yield enables company to focus on renovations and geographic diversification. It's been 3.5 years of success.  Did you miss the news?

[autofocus111]

Total return in the last five years has been mediocre. Do you truly believe TD's story for a $59 target? I have serious doubts about it.

[Northforce13]

It will go higher, but yes you are right about the past five years.  It's a very peculiar stock because of WCan volatility... oil crashed in 2015 as we know, which tanked BEI of course, which got smashed right into 2017 as a result of the aftereffects of Alberta economy getting smashed.  Then their results stabilized and started to recover, DESPITE (this is critical) Alberta still

[autofocus111]

Northface You make some good points. But it comes down to where you think oil is headed. Is $60 WTI enough to sustain a strong recovery in AB? That's where I have my doubts.

[malx1]

If you think $60wti will be the avg price in a post-covid world, then I can understand your lack of enthusiasm for the best quality reit which holds significiant western canadian residential exposure.  NAV climbing, profitability climbing, management rational and holds material position in their company. $75-85wti is more realistic.  If you doublt that, why invest in regions that

[WDMBell]

What is the difference between MEQ and BEI?  Personally I feel BEI has more going for it than MEQ, however MEQ has risen far past pre-pandemic levels as have all other aparment REITs.  Given this BEI is either way undervalued or MEQ is far over valued.

[malx1]

MEQ is trading at about 20x FFO of 2021.  Fully valued but could run to $120 based on expected performance. BEI is undervalued because of its concentrated exposure to Alberta.  While the unicorn farming crowd are afraid of Alberta, I'd say it's the reason to buy BEI.  Energy sector recovery underway.  Oil will be $80+ as long as world doesn't tank into deep

[autofocus111]

malx1 BEI traded below NAV even before the 2014/15 oil bust. It's why I bought it in the first place. I would love nothing more than to see oil trading at $80 WTI. Long CVE, SU, and OVV, and perfectly happy with WTI at $60+. Not nearly as confident as you about a sustained move to the $80 mark. CV19 is not going away and that will be a sustained overhang on oil demand growth esp. air travel

[malx1]

Net migration of province will spike back up as ecnomomy improves.  Housing affordability will also be a key driver. https://economicdashboard.alberta.ca/NetMigration#alberta While Alberta has very little impact on the price of oil, their economy lives and dies by the price of oil.  So one must reflect on both the demand for oil as well as supply.  In your analysis, you mention

[autofocus111]

@malx1 Migration into AB depends on job growth in the O&G sector. Stagant oil supplies ie. no production expansion projects means weak job growth for AB. Higher oil prices, while great for producers, means ziltch for housing demand in the province if there is minimal investment by O&G companies to increase production. As you yourself point out, increased focus on ESG and stretched balance

[malx1]

And maybe that's where our macro views diverge.  I think a sustained $75wti will eventually repair balance sheets, put co's in position to pay dividends AND increase production marginally over next 36 months.  Only thing derailing this train will be unexpected event like Chinese financial crisis or NA covid lockdowns.   Time will tell.  Oil inventories getting low

[Northforce13]

Yes.  And with production growth (more like exploration for future production)... which is happening based on the data above, jobs and RE are very strong, as evidenced from the booming rig count (production growth), cratering unemployment rate (jobs growth) and booming housing demand (per developpers) Easy to see why BEI has smoked its peers in terms of price appreciation Still very long

[malx1]

Seems we are on the same page.  Thanks for solid post.  There's a few analysts hiding in the woods suggesting new highs for oil in the next few years.  I hope that's not the case but I believe that $80-90wti avg would be good for everyone in AB, including the sacred E&P co's. https://financialpost.com/commodities/energy/oil-gas/eric-nuttall-we-are-about-to-hit-a

[autofocus111]

Rig count does not look all that impressive to me if you look at data going back to 2014. It's basically back at 2019 levels.  https://boereport.com/caodc-rig-count/ Same goes for oil production. https://economicdashboard.alberta.ca/OilProduction What proportion of the rigs are simply to make up for well depletion? OIl producers need prices to stay high for at least another year to

[malx1]

LoL @ autofocus111, Wrong again. Maybe you missed the headlines... "Alberta population on track for biggest boom since 1914" https://edmonton.citynews.ca/2023/06/29/alberta-population-growth/

[malx1]

The RE boom doesn't show up until 3-4yrs into the recovery in oil patch. People across country are looking for affordability as foreign money is being laundered by satellite families in Vancouver/Toronto/Montreal housing markets.  Tax paying Canadians are moving away from the foreign speculator's.  BEI nav will grow with AB economic recovery and relocation of Canadians seeking

[malx1]

Less than a year ago... Autofocus111 says they have "Serious doubts" about $59 price target What's the price today?

[autofocus111]

Less than a year ago? My last post on this thread was nearly two years ago, and it was predicated on the assumption of oil prices not moving up above $60. Obviously with higher oil prices the investment thesis changed. And despite oil pushing well into the 80's and sustained prices above $70, the stonk is a mere 10% above that $59 target TD laid out back then. PS: No comment on my recent post

[malx1]

That's a lot of moving pieces.     What is so significant about $70 vs $65? If you don't like the business why not sell today?  I'll just keep watching management build the NAV and the share price moving higher.    

[malx1]

Ah, comments from 2021 I see.      Well then you've been wrong from two years, not one.    Thanks for pointing that out.    You're asking about the language used by management in last update.     Long-term tenants can qualify for discounts and incentives.  Nothing unusual about taking care of your best customers. 

[autofocus111]

Funny guy. Per the RBC update retired posted the 'moderation' apparently applies to new leases not just renewals. I still find the choice of words unusual given the strong market in AB. As far as an exit at $70 instead of $65 this is not about not liking the company (although I firmly believe a higher dividend is warranted), it's about the valuation. I aim to maximize my return and if

[malx1]

Tough to admit when you're wrong, hey? If you were bearish on BEI, then holding it for years while incessently complaining is irrational behaviour.      Might be good for you to do a little self assessment. The psychology of investing.     You suffer from anchoring bias and loss aversion.    [url=https://https://www.financestrategists.com/wealth

[malx1]

A good read: https://www.investopedia.com/articles/05/032905.asp There really isn't anything to complain about at BEI.  What I think has happened is that your personal Investment Objectives have changed along the way. If you're seeking hi-yield, then there's plenty more REITs that pay much larger amounts of AFFO. Stick around.  Would rather see you hit $80+ than exit

[autofocus111]

I don't need your advice thanks. I've done just fine investing over the last 3 decades. 

[malx1]

If you haven't figured out these basics in 3 decades, you're not improving / progressing That's a lot of time and energy wasted. Bitterness

[malx1]

Autofocus111 you don't need any advice.    Of course.    You were wrong about oil You were wrong about AB immigration You have been wrong about Boardwalk Reit for about a decade  Yet you're still here.    Fascinating.   

[malx1]

But aren't you the guy skeptical of $59, now TD says their target is $80?!! Something not adding up.

[malx1]

Growing the NAV is a journey that can last decades.     You're focused on a $70 target now when you said you didn't believe the units would trade at $59. Why didn't you sell at $59? So many retailers, so many unfounded complaints.      Nobody will mind if you sold today.    Stock is now $5 higher than your tantrum about $59 so. The comedy

[malx1]

Why didn't you sell at $59 if you dislike the business so much?

[malx1]

Does anyone know the difference between NAV building and Exuberance? Which one is driving the unit price past Autofocus111's $59 price target?

[malx1]

You'll get your $70, then you can exit one of the best managed REITs in the country. BEI will be a BNN darling after it touches new highs.      That'll push it even higher as all the groupies pile on at full value.   Check back in for the celebrations here at $80, $90 and especially $100.   

[malx1]

Let's re-visit a classic post from Autofocus111, the summer of 2021. This character had serious doubts of TD's $59 price target. Remind me, what are we at now?  $66 What's TD's target now?  $80 Who's stopped complaining about this REIT now?  Autofocus111 When times get tough, Trudeau and others go into hiding. Happens frequently on SH too.

[autofocus111]

Like I said last time $70 and I'm out.  All the analysts are trying to pump it there but so far no cigar.

[malx1]

So after 30yrs experience investing for your self, you still think analysts try to "pump" share prices to their targets?  

[autofocus111]

They are sell side analysts. But you probably don;t know waht that means huh.

[malx1]

Who are bonused on their accuracy. You've yet to learn industry basics after 3 decades. Certainly explains your attitude.  Unwarranted criticism of best performing REIT in Canada.  Fascinating. Looking forward to that arbitrary $70 target next few quarters. The rest of us will celebrate at $80, $90 and $100 unit price.

[malx1]

Reminder Autofocus "doubts" BEI.un can reach $59. More comedy from the SH professionals.

[malx1]

Remember when this dopey guy "had doubts" about $59 price target? Now the price is $80 and the target is near $100. Still have doubts? Guessing they have bigger doubts to deal with than their horrible track record.

[malx1]

AUTOFOCUS111 has serious doubts about $59 target as of (8/16/2021 2:51:18 PM) Well, today we see $100 target from Raymond James. How about them apples? --------------------------------------------------------------------------- Globe says Boardwalk REIT rated "outperform" 2024-09-06 07:31 ET - In the News The Globe and Mail reports in its Friday edition that Raymond James analyst