TSX:NWH.DB.G - Post Discussion
Post by
incomedreamer11 on Aug 14, 2024 10:44am
Scotia comments on result
Glance: Q2 Miss on Higher G&A and Brazil; Much Improved Balance Sheet Is the Key Catalyst
OUR TAKE: Net-net slightly positive. Is Q2 miss enough to offset good news on UK portfolio sale (penny wise, pound foolish?). We don’t think so. We expect NWH unit price to outperform tomorrow.
(-) Q2 miss: Reported FFOPU of $0.091 below Scotia and consensus estimate of $0.106 (wide range $0.09-$0.13). See Exhibit 1 for variance. Miss due to higher G&A and lower NOI from Brazil (f/x also responsible). Core markets Australasia and Europe beat. So, net-net we are okay with Q2 results.
(+) UK portfolio sale pre-announced: On 8th Aug, NWH announced sale of UK portfolio for $885M at 5.9% cap rate. NWH recorded $105M of FV loss due to sale which equated to 10.6% of IFRS value as of Q1/24. This should be seen in the context of IFRS valuation relative to current unit price. Revised IFRS NAVPU is $9.53 (-$0.83 q/q mainly due to UK sale). Current price implies 48% discount to IFRS NAV. Interestingly, NWH mentioned that they received >10 offers with significant local and international interest.
(+) Balance Sheet risk profile improved: 27% of total debt maturity in 2025 vs 42% previously. $873M of total debt repaid since Q1/24 at average rate of 7.6%. Pro forma leverage reduction by ~5.5 points to ~55% from ~61% (Proportionate Debt/GBV).
(+) High-interest bearing debt being repaid post UK portfolio sale: NWH to repay (i) $140M of Brazil debt at 11.3% interest rate with 2025 expiry. (ii) $460M of UK debt at 6.2% interest rate with 2025 expiry. (iii) $95M of corporate debt with 9.42% interest rate and 2025 expiry. Link to our recent note post UK portfolio sale.
(+) More progress on asset dispositions: Total dispositions of $400M in H1/24 with $234M disposed in Q2. Including Q3 sales, total dispositions at $1.3B in 2024 so far.
(=) Operational portfolio continues to perform well: SP NOI grew +4.2% y/y in Q2 (+6.0% in Q1). SP grew across the geographies (no one region outlier as such). Portfolio occupancy is unchanged q/q at 96.5% with a WALT of 13.2 years, which is one of the longest in our coverage.
(=) IFRS NAVPU decreased 8% q/q to $9.53 (from $10.36 in Q1): FV loss was $175M this Q ($73M in Q1) vs an average of $88M loss in the last four quarters. IFRS cap rate now at 6.22% vs 6.0% last q (up 22bp q/q).
(=) Majority of the AUHPT proceeds were redeemed so far: As expected, NWH received $20.3M from its investment in AUHPT in Q2. Proceeds were used to repay Australasian term debt which was secured by the investments in AUHPT. NWH redeemed a total of $170M of its investment in unlisted securities so far, with the proceeds used to repay balances outstanding on credit facilities.
Full update post @10am ET conf call tomorrow.
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