NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties REIT (NWH.UN) is a Canada-based (REIT) operating a portfolio of healthcare real estate comprised of interests in approximately 149 properties located throughout major markets in Canada, Brazil, Germany, Australia, and New Zealand.

Key highlights

• An Income Play: The group has a proven track record of distributing the dividend. On December 15, 2020, the company announced a monthly dividend of CAD 0.067 per common share to be paid on January 15, 2021. At the last traded price, the stock was offering a dividend yield of ~6.3%, which is lucrative considering the current interest rate environment.

• Well-diversified and Strong Tenant Base: In Q3 2020, the occupancy rate remained stable at 97.2%, in line with the previous corresponding period. The company is generating more than 80% of the total portfolio base rent from tenants with government support, while the top ten largest tenants accounted for approximately 33.4% of the base rent.

The REIT’s assets are diversified geographically and by asset type as follows:

Source: Company 

• Robust Rent collection: The group reported solid rent collection of 97.6% in Q3 2020, which indicates high-quality tenants coupled with solid operational fundamentals. In October 2020, the company reported 98.1% rent collection, which is impressive amidst the ongoing economic cycle. 

Financial overview

Source: Company 

• In Q3 2020, the company reported revenue of CAD 95 million, an increase of CAD 3.9 million, compared to CAD 91.1 million recorded in the previous corresponding period, primarily due to incremental revenues from property acquisitions.
• Net operating income reported by the company in Q3 2020, stood at CAD 72.2 million, an increase of CAD 2.4 million as against CAD 69.7 million in the previous corresponding period, due to the favourable impact of property acquisition making higher revenues.
• The company reported a net income attributable to unitholders of CAD 19.9 million in Q3 2020, as against a net profit of CAD 18.5 million in Q3 2019.

Risks associated with investment

As the revenue and operating results of the Company depend significantly on the occupancy levels and rent collection, hence any fluctuation in these would affect the group’s performance. 

Valuation Methodology (Illustrative): EV to EBITDA 

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The company has a resilient business model and reported impressive rent collection at 97.6% in Q3 2020, and 98.1% in October, which is the first month of the upcoming Q4 2020. Along with this, the company also have well-diversified and Strong Tenant Base. In Q3 2020, the occupancy rate remained stable at 97.2% helped the company in generating more than 80% of their total portfolio base rent from tenants with government support. Further, the stock is offering a lucrative dividend yield which is encouraging form the income investor’s standpoint. Therefore, based on the above rationales and valuation, we have given a ‘Hold’ rating at the closing price of CAD 12.71 as on December 17, 2020. We have considered Boardwalk Real Estate Investment Trust, Allied Properties Real Estate Investment Trust, WPT Industrial Real Estate Investment Trust, etc. as the peer group for the comparison.

Source: Refinitiv (Thomson Reuters)

Disclaimer

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