Q: NWH.UN released its earnings today and had perhaps a little bad news - AFFO did not cover the distributions in the quarter - and some good news - deleveraging plans seems to be on track and the CEO comments even raised the possibility of share buybacks once the deleveraging plan is further advanced. What do you make of todays results and these comments in particular? Has it turned the corner? Optimistic or pessimistic?
5i Research Answer:
We would consider results OK. Cash flow per share of 16c did miss estimates of 17c, but revenue of $135M beat estimates of $122M. Payout ratio has risen but on an annual basis was 68% in 2022. Operating income increased, offset by higher rates. Occupancy is good at 97%, leases are long and many are indexed. The convertible issue, the institutional investor and the planned asset sales should add a lot more financial flexibility. The proof will be in the pudding but the comments we think make the point that management knows that leverage and recession concerns are hurting their valuation. We are not sure the corned has been turned, but are more optimistic than pessimistic, largely because of its already-low valuation.