Medical Properties Trust: Oversold And Undervalued Even Against Headwinds

seekingalpha11-24

Medical Properties Trust is significantly undervalued, trading at $4.30 per share, 34% below its 52-week high, with a 7.44% dividend yield.MPW has reduced its total debt to $9.2 billion through $2.9 ...

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MPW is trading for 10.6x its annualized third-quarter free cash flow. Free cash flow was roughly $60 million, around $240 million annualized. Free cash flow should also rise in future quarters as MPW benefits from its near-term capitalizations.","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","BK4588":"碎股","BK4203":"医疗保健房地产投资信托"},"translate_title":"医疗财产信托：即使在逆风中也被超卖和低估","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MPW":0.9},"content_text":"Medical Properties Trust is significantly undervalued, trading at $4.30 per share, 34% below its 52-week high, with a 7.44% dividend yield.MPW has reduced its total debt to $9.2 billion through $2.9 billion in liquidity transactions but faces significant debt maturities in 2025.The REIT's market cap of $2.55 billion is a 53% discount to its shareholders' equity of $5.44 billion, indicating a potential for price recovery.MPW's selloff is driven by inflation concerns and high Treasury yields, but potential Fed rate cuts and asset sales could mitigate debt risks.   ER Productions Limited/DigitalVision via Getty Images  Medical Properties Trust (NYSE:MPW) has dipped quite markedly from a recent high. The common equity is now trading materially below its 52-week highs even as a stream of liquidity transactions and Fed rate cuts open up a clear pathway for the internally managed general acute care hospital REIT to reinstate its higher base quarterly dividend and recover to a more reasonable price per share. What price is this? Higher than the current stock price. MPW is swapping hands for roughly $4.30 per share, down 34% from its 52-week high. This REIT last declared a quarterly cash dividend of $0.08 per share, $0.32 per share annualized for a 7.44% dividend yield. Data by YCharts The REIT held cash and cash equivalents of $276 million at the end of its fiscal 2024 third quarter, up roughly $26 million from its year-ago comp. The REIT has completed $2.9 billion of liquidity transactions year-to-date to drive a reduction in total debt to $9.2 billion. This is a substantial dip from total debt of $10.44 billion at the end of the first quarter of 2023. Critically, MPW's current market capitalization of $2.55 billion is far too low when set against shareholders' equity of $5.44 billion at the end of the third quarter. This is a discount of 53% but comes with shareholders' equity that's admittedly been dropping for over four quarters. Data by YCharts Why I Might Buy More Shares The Fed has cut rates by roughly 75 basis points through the last two FOMC meetings with the probability of another 25 basis points cut at the December FOMC at 52.7%. The stock price has not become cognizant of this because the 10-year Treasury yield has spiked in tandem due to inflation concerns from the new political reality. Tariffs and tax cuts could drive inflation, depending on the extent, but the market has clearly moved to price in material long-form inflation derailing future Fed rate cuts.   Trading Economics Does this justify commons that are trading for 6.7x the midpoint of annualized third-quarter normalized funds from operations? This was $0.16 per share in the third quarter, around $94 million, and $0.64 per share annualized. MPW is trading for 10.6x its annualized third-quarter free cash flow. Free cash flow was roughly $60 million, around $240 million annualized. Free cash flow should also rise in future quarters as MPW benefits from its near-term capitalizations. The REIT recently announced a deal to sell Prospect's managed care business for $745 million to Astrana Health (ASTH). MPW will receive roughly $200 million from the deal, with the bulk of this expected in the first half of 2025.   Seeking Alpha The managed care business formed a major overhang for the stock but the market had a muted reaction due to the deal being announced against the down market for REITs on the back of the 10-year spiking. While the transaction is at a significant discount to the amount MPW invested of roughly $654 million, the investment provided zero free cash flow. The proceeds come at a time when MPW faces significant debt maturities in 2025 of around $1.26 billion. This is 13.5% of its total debt balance.   Medical Properties Trust Fiscal 2024 Third Quarter Form 10-Q MPW's debt maturities form the most salient risk facing the REIT. It's relatively front-loaded with 53.6% of its total debt balance coming due over the next three years, a headwind that would be compounded if the Fed does not keep cutting rates at upcoming FOMC meetings. The REIT generated revenue of $225.83 million, down 26.3% over its year-ago comp and missing consensus by $13.88 million. I don't see MPW hiking its dividend against the coming debt maturities unless it can push out its maturities.   Medical Properties Trust Fiscal 2024 Third Quarter Supplemental There is far too much debt to be focused on returning more cash to shareholders. While the debt burden is heavy, MPW has realized north of $2 billion in liquidity transactions year-to-date and will likely be able to raise more funds through asset sales and refinancing transactions to address its debt burden. The question is whether the REIT is far too discounted against its broad headwinds even as green shoots spring up to dispel the bearish narrative. EBITDARM rent coverage has been on the up across its portfolio.   Medical Properties Trust Fiscal 2024 Third Quarter Supplemental  MPW's selloff reflects a weak REIT market over the last two months as the 10-year Treasury yield spiked to reflect the potential inflationary risks from the incoming White House administration. These fears look set to moderate, especially with Scott Bessent chosen as Treasury Secretary. This was the desired choice from Wall Street, with Bessent described as a fiscal hawk who sees tariffs only as a maximalist tool. MPW stands to recover some value from a broad REIT rally as shareholders continue to collect a near-8% dividend yield.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","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":"4.29.3","shortVersion":"4.29.3","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/2485648797"}