Mining & Metals
CIBC Reiterates Canadian Net Real Estate Investment Trust's Neutral Rating, Maintains its C$7.00 Price Target
CIBC Capital Markets reiterated its neutral rating on the units of Canadian Net Real Estate Investment Trust (NET-UN.V) and maintained its C$7.00 price target after the REIT reported its first quarter results on May 21.The REIT reported Q1 FFO/u of $0.166 (+1%) vs CIBC at $0.174, consensus at $0.17, said CIBC.CIBC noted, the forecast variance is attributable to lower-than-expected NOI and higher-than-expected G&A expenses.The FFO/u growth is primarily attributable to acquisitions made early in Q1 last year, as occupancy remains consistent at 100%, said CIBC.CIBC reduced its NOI forecasts to better reflect current performance and increased its expected refinancing rates based on recent volatility, it said.These factors trim CIBC's FFO/u forecasts 3-4%, it added. CIBC's NAV estimate remains largely the same, as it reduced its cap rate assumption -25 bps to 6.75%."Part of the reason we reduced our forecasts is to reflect higher refinancing rates through 2027," said CIBC, and added that 26% of NET's mortgage debt comes due in 2027, and so its "FFO estimates are sensitive to the assumed refinancing rate"."Using rates in the high-4% range, we saw our FFO/u forecasts fall 2-3%," added CIBC. "With yield curves in flux, we expect we could be revisiting our 2027 forecast more than once over the next twelve months."CIBC further noted, having raised capital in the form of convertible debentures to fund new acquisitions, management expects FFO/u results to improve once the capital is deployed. In hand, NET estimates it has $12MM of capital to put to work on new acquisitions, which could rise to as much as $40MM by upfinancing existing properties, added CIBC."Our $7.00 price target is derived from a 10.1x multiple (9.7x before) on 2027E FFO/unit of $0.69, equivalent to a ~7% discount to our $7.50 NAV at a 6.75% cap rate," said CIBC.
$NET-UN.V
