TSX:MRT.DB.A - Post by User
Post by
incomedreamer11on Apr 28, 2023 3:37pm
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Post# 35419917
TD comment on result
TD comment on resultEvent Q1/23 results and forecast update.
Impact: SLIGHTLY NEGATIVE
Q1/23 FFO/unit (f.d.) of $0.22 was +8% versus Q1/22, and was in line with our estimate (consensus: $0.213). Excluding a $2.8mm one-time property tax refund, FFO/unit would have been ~$0.03 below our estimate.
Q1/23 SPNOI growth of +1.3% marked the eighth consecutive quarter of positive same-asset performance. The retail segment continued to perform well delivering +5.8% SPNOI growth (including +8.6% in the Enclosed Malls portfolio). Although occupancy declined 90bps in the quarter, management attributed this to normal seasonality following the holiday season and expects an improvement in 2023. Office portfolio SPNOI was -1.9% (-32.4% in the multi-tenant building), driven by a tenant vacancy in the quarter at 77 Bloor St. W in Toronto. Management noted that the portfolio will also be impacted by an upcoming non-renewal at an Ottawa asset (13,000 sf). Industrial SPNOI growth declined 21.9% (only 1% of NOI) due to a vacancy from a tenant that chose not to renew in Q4/22. Looking ahead, management remains confident on the ~740k sf of GLA coming due over the remainder of this year (~10% of total GLA). Leasing discussions have remained active in the retail portfolio, with management expecting all of its larger tenants (5,000sf+) to renew. Office leasing discussions have remained muted due to softening fundamentals and uncertainty around long-term office needs. We believe this disproportionately impacts older commoditized office assets such as the ones in MRT's portfolio. Morguard also has 40,000sf in Industrial maturing this year, which they expect to renew with favourable uplifts in rental rates.
Forecasts. Our 2023/2024 AFFO/unit estimates have decreased ~12% largely on lower NOI assumptions and higher interest expense. We expect an 11% decline in 2023 and 3% growth in 2024. Management also expects elevated capital expenditures into 2024 above its PCME reserve amount, due to contractor delays, catch-up spending, and elevated leasing capital for upcoming renewals.Our $7.90 NAV/unit estimate is -2%.
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.