UPDATE: BMO Capital Upgrades Sun Communities (SUI) to Outperform
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(Updated - September 16, 2016 8:53 AM EDT)
BMO Capital upgraded Sun Communities (NYSE: SUI) from Market Perform to Outperform with a price target of $85. Analyst Paul E. Adornato likes fundamentals and is bullish on its Carefree Communities acquisition.
"We believe this and other acquisitions in the last two years have helped narrow the gap between SUI and nearest peer ELS in terms of portfolio quality, diversification, size, cost of capital, trading liquidity, and operating leverage. Therefore we believe SUI's 24% discount to ELS should narrow to 10%," said Adornato.
Carefree provides growth with increased density in key Florida markets and an entry to the high-growth, high-barrier California market, the analyst continued. "Additional occupancy gains, margin improvement, gradual build-out of 9,900 sites now available for expansion and the potential to convert more transient RV sites to seasonal and permanent rentals will fuel medium-term growth - we forecast +4.1% and +14.1% FFOps growth in 2016/17."
Adornato added, "SUI has delivered an average SSNOI growth of +4.2% over the last 15 years, compared with 3.9% for ELS and 2.7% for the Multifamily REIT sector. We think SUI's acquisitions have contributed to their aboveaverage SSNOI growth over time."
Shares of Sun Communities closed at $76.94 yesterday.
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