Mizuho Securities Reiterates Buy on Ventas (VTR) Ahead of 3Q Report

October 24, 2016 7:39 AM EDT
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Price: $62.64 +0.71%

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    3 Buy, 13 Hold, 3 Sell

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Mizuho Securities reiterated a Buy rating and $84.00 price target on Ventas (NYSE: VTR) ahead of the company's 3Q earnings report. The company took a $700mm loan to help finance Ardent's purchase of LHP. VTR's key focal point with regard to its fledgling hospital platform is market share, and estimates Ardent's at 25%-50% and LHP's at upwards to 60%. The loan is the first follow-on hospital investment since the August 2015 Ardent deal.

Analyst Richard Anderson commented, "We will be reviewing our model following 3Q16, including the accretive impact from higher interest income ($700mm @ 8% initially, growing with LIBOR, and a five-year term). However, we see that as a short-term benefit only that doesn't necessarily sway REIT investors. The size of Ardent Health Services would grow by about 50%, from 14 to 19 hospitals, with the planned merger with LHP Hospital Group. As such, a few things could materialize longer-term as VTR propagates its hospital agenda, such as broadening VTR's hospital rolodex (including several notfor-profits that are participants in existing joint ventures on the five real estate assets currently owned by LHP). Not-for-profits make up the vast majority of US hospitals, so this is important stepping stone for any new entrant into the hospital business. VTR also has first rights on the LHP hospitals, but it is complicated at the moment by the aforementioned joint ventures. Even further out, protecting the Ardent balance sheet could be a precursor to a future IPO, thereby broaden VTR's net of influence and relationships. So we think VTR is making the loan commitment (along with a stamp of approval vis-à-vis an undisclosed equity investment from Sam Zell's EGI) to open up a variety of potential future outcomes."

For an analyst ratings summary and ratings history on Ventas click here. For more ratings news on Ventas click here.

Shares of Ventas closed at $68.36 yesterday.



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