TD Securities raised its price target on Sienna Senior Living Inc. (SIA.TO) to $19 from $18 on Monday.
Analyst Jonathan Kelcher maintained a Buy rating on shares of the Canadian senior housing company.
He resumed coverage of the stock following Sienna's agreement to purchase a 540-suite Continuing Care LTC portfolio in Alberta for $181.6 Million, or $336,000 per suite.
"Overall, we view the transaction favourably, with the portfolio expected to deliver a ~6.5% year-one yield and the purchase price coming at a discount to replacement value (management estimates the cost of new builds is in the $450k/suite range)," Kelcher said in a note to clients.
"While government funding has not kept up with cost increases in recent years, management believes there is potential for catch-up funding (similar to what happened in ONT this year), which would boost the near-term return," the analyst said.
"SIA is entering what we view as an attractive AB market that is undersupplied on the LTC side, and we expect to see more acquisitions (retirement and LTC) in order to build scale," Kelcher said.
"While the 6.5% year one-cap rate seems relatively low for LTC, we believe the potential exists for 'catch-up' funding increases to push this higher relatively quickly."
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
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