Ramco: Quality Over Quantity Not Enough To Excite

rpt average base rentsRamco-Gershenson Properties Trust’s (NYSE:RPT) figures for Q2 2015 have not excited investors as share price has increased slightly Thursday following the earnings call. This shopping-center REIT focused on Midwestern metropolitan areas, demonstrated strong operational results and narrowed full-year guidance, but has not signaled major shifts (apart from the recently announced acquisition of their partners’ interest in seven shopping centers), wanting to maintain a strong balance sheet with investment grade profile. Net-debt-to-capitalization has been about 38 percent.

FFO per diluted share stayed the same at $0.31 during Q2 2015 in comparison with Q2 2014. Although overall FFO increased, the number of diluted shares increased at the same magnitude. Total revenues, on the other hand, increased 20 percent. Operating expenses stayed at the same level, and RPT’s current portfolio has also been managing well: Same-center NOI grew 2.3 percent in Q2 2015 and 2.8 percent this year.

rpt locationsSame-center occupancy also grew 20 basis points to 94.2 percent, and management expects occupancy to experience some gains; however, with regard to tenants, they are looking more for quality than for quantity, so they will not advance that much. New and renewed leases have also increased. This is an important part of RPT’s strategy; they have seen increasing average base rents and generated same-center NOI growth between 3 and 3.3 percent over the past three years. Their plan for 2015 is to keep same-center NOI growth between 2.5 and 3.5 percent.

From a valuation perspective, price-to-FFO at 13.2 is below the shopping-center sector median of 16.5. Dividend yield has been 4.7 percent — higher than the 3.9 percent sector median. Dividend payout ratio is 65 percent, so RPT has some time to increase dividends this year.

Although RPT has done everything necessary to thrive in the future, I would like to see more FFO-per-share growth before I invest with them.

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Source: Ramco-Gershenson Properties Trust, Fast Graphs

Written by Heli Brecailo

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