KeyBanc Starts MedEquities Realty Trust (MRT) at Overweight
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KeyBanc initiated coverage on MedEquities Realty Trust (NYSE: MRT) with a Overweight rating and a price target of $13.
Analyst Jordan Sadler said, "Shares appear undervalued at current levels, particularly given that, as a small-cap healthcare REIT, we expect the Company will be well positioned to deliver above average growth, as incremental, higher cap rate investments will move the earnings needle. We suspect management’s experience financing and acquiring healthcare real estate will prove beneficial in sourcing off-market and lightly marketed deals. Our view is underpinned by MRT’s strong balance sheet (3.1x net debt/EBITDA) and $150M of dry powder."
"MRT’s focus on smaller deals has allowed the Company to benefit from strong acquisition volumes and attractive pricing since inception, without weakening underwriting standards; the stabilized portfolio enjoys 1.4x facility-level EBITDAR coverage, with 1.3x coverage at SNFs (2.0x at guarantor level) and 1.4x coverage at hospitals (1.8x at guarantor level). The stock trades at a 22% discount to our $13.47/sh estimate of NAV and a 10.1% implied cap rate, which is 180 bps above comparable healthcare REIT peers and 410 bps above the REIT-weighted average," added the analyst.
Shares of MedEquities Realty Trust closed at $10.57 yesterday.
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