Medical Properties: Short Squeeze Potential

seekingalpha11-09

Medical Properties is making progress in its portfolio restructuring and debt reduction, showing signs of a potential turnaround by FY 2025.The REIT's balance sheet improvements include a $848.5M debt...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMedical Properties: Short Squeeze Potential\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-09 13:53 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4735318-medical-properties-short-squeeze-potential><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Medical Properties is making progress in its portfolio restructuring and debt reduction, showing signs of a potential turnaround by FY 2025.The REIT's balance sheet improvements include a $848.5M debt...</p>\n\n<a href=\"https://seekingalpha.com/article/4735318-medical-properties-short-squeeze-potential\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4225","symbol_name":"医疗保健房地产信托","start_time":0,"source_url":"https://seekingalpha.com/article/4735318-medical-properties-short-squeeze-potential","article_id":"2482579418","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1158571584/image_1158571584.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2482579418","pubTimestamp":1731131612,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Medical Properties is making progress in its portfolio restructuring and debt reduction, showing signs of a potential turnaround by FY 2025.The REIT's balance sheet improvements include a $848.5M debt","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4225":"医疗保健房地产信托","MPW":"Medical Properties Trust","BK4585":"ETF&股票定投概念","BK4203":"医疗保健房地产投资信托","BK4588":"碎股"},"translate_title":"医疗属性：轧空潜力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MPW":0.9},"content_text":"Medical Properties is making progress in its portfolio restructuring and debt reduction, showing signs of a potential turnaround by FY 2025.The REIT's balance sheet improvements include a $848.5M debt reduction YTD through asset sales.MPW remains a highly shorted stock, but ongoing business improvements could reduce short interest and lead to a higher valuation.Despite dividend cuts, Medical Properties offers attractive capital appreciation potential through continued asset sales and debt repayments.   Richard Drury  Medical Properties Trust (NYSE:MPW) announced third-quarter earnings on Thursday that missed FFO predictions due to the hospital REIT selling more assets and recording impairment charges relating to its real estate portfolio. Nonetheless, the most recent earnings release of Medical Properties showed that the REIT is making progress in terms of its portfolio restructuring and the reset dividend has been well-supported by normalized funds from operations. While the rebound of Medical Properties may take some time, I believe we could be seeing signs of a successful turnaround in FY 2025, which should help support a revaluation to the upside. Since Medical Properties remains a highly shorted stock, I believe business improvements could result in a reduction of the company’s high short interest ratio, and the odds for a breakout to the upside are favorable. Data by YCharts Previous rating I rated shares of Medical Properties a strong buy -- Steward Settlement Is A Big Deal -- after the hospital REIT reached a final settlement with its previously the largest tenant, Steward Health Care, that cleared the path for a comprehensive restructuring. In the third quarter, Medical Properties made continual progress shrinking its portfolio and repaying more of its long-term debt. I believe the REIT is evolving in the right direction, and I confirm my strong buy rating for MPW after the Q3 earnings report on Thursday. Balance sheet restructuring and normalized FFO In the September quarter, Medical Properties continued to make progress in terms of repaying its debt, which has become a key issue for shareholders. As of the end of the September quarter, the hospital REIT had total long-term debt outstanding in the amount of $9.2B, showing a decline of $153.3M in the last quarter alone. Since the end of FY 2023, this progress has been much more significant, however: January through September, Medical Properties reduced its total long-term debt by $848.5M or about 8%. Medical Properties Medical Properties has achieved this reduction in its long-term debt through asset dispositions that I covered here. In the third-quarter, the hospital REIT continued to sell non-core assets in order to deleverage its balance sheet and simply its portfolio: in total, Medical Properties sold 8 freestanding emergency department facilities plus one hospital in Arizona and Colorado for total proceeds of $246M. This brought the REIT’s total YTD asset proceeds to $2.9B, compared to $2.5B in Q2’24. Medical Properties has guided for a total of $2.0B in asset dispositions in FY 2024 which the company widely exceeded already. Asset sales are a main instrument for the company to lower its total debt burden and reduce its portfolio to a more manageable size, and the REIT is not done yet: Medical Properties just announced that it was selling the majority of Prospect’s managed care platform to Astrana Health for approximately $745M. The REIT expects to get $200M in cash proceeds, which the company could use to repay some of its near-term debt maturities or its credit facility revolver. In the third-quarter, the hospital REIT had normalized funds from operations/NFFO of $93.9M, showing a decline of 58% year-over-year. This decline has been driven by a shrinking portfolio (which implied lower funds from operations) as well as fair value adjustments related to some of the REIT’s remaining properties. In the third-quarter, Medical Properties recognized a total of $608M in impairment charges, which are non-cash and should not be recurring. With MPW lowering its dividend to just $0.08 per-share in Q3'24, the REIT covered its dividend by a factor of 2.0X (Q3'24 normalized FFO was $0.16 per-share). Medical Properties Short squeeze potential I continue to see MPW as a potential candidate for a short squeeze. First, Medical Properties’ shares continue to be highly shorted. The REIT is currently seeing approximately 36.3% of its shares shorted, which makes MPW one of the most heavily shorted stocks on Wall Street. Secondly, MPW is making slow, but steady progress in terms of selling assets and paying debt, which should ultimately lead to a higher valuation multiplier. Since the REIT is moving in the right direction with its debt reductions and asset dispositions, a short interest position, in my opinion, is going to be less and less appealing for investors going forward. The unwinding of short positions could be a potent catalyst that makes a share price revaluation to the upside a reality. Data by YCharts Medical Properties’ valuation I estimated that Medical Properties, accounting for its past asset sales, had a run-rate normalized funds from operations level ~$0.83 per-share, which, I believe, is still a fairly realistic assumption considering that recent impairment charges should not be recurring. My previous calculation was based off of a fair value normalized FFO multiplier of 7-8X which yielded a fair value range of $5.81-6.64 per-share, implying up to 46% upside revaluation potential. At a current price of $4.54 per-share, MPW is valued at just 5.5X forward P/NFFO which seems an unreasonably low estimate given that the REIT is making progress with its asset divestment program. The longer-term estimate could be much higher, however, as the REIT will ultimately want to return to positive growth. In my last work I stated that I saw a long-term fair value in excess of $10, which I stand by considering that Medical Properties Trust is doing actually quite well in selling a lot of assets to many different buyers. In my opinion, the single biggest catalyst for MPW is the continual execution of its asset divestment program and the application of excess cash to the REIT's debt balance. Risks with Medical Properties Medical Properties is operating in a competitive field of the healthcare industry, the leasing of hospitals and other medical facilities to healthcare operators. Problems at the operator level often trickle down to the landlord (the REIT) which introduces an element of risk into the equation that can be significant. If operators fail to make timely rental payments, this can destabilize the landlord as well, which is what we have seen with Steward Health Care in the last year. The key to avoiding this trickle-on effect is for companies to avoid leveraging up their balance sheets, which is a crucial mistake that Medical Properties made and which compounded the REIT's problems. The biggest risk therefore would be if the REIT embarked on a new, debt-fueled acquisition spree. Final thoughts  Medical Properties’ third-quarter earnings were not as bad as they looked on the surface, as impairments are non-cash and are non-recurring. The REIT is on a good path, in my opinion, in terms of shrinking its operating portfolio and trying to establish a new base-line of sustainable normalized funds from operations. Medical Properties will continue to sell assets to lower its leverage and repay debt maturities in the coming quarters, which continues to make the hospital REIT chief a restructuring and short squeeze play for investors.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2482579418"}