Medical Properties Trust: The Opportunity Remains

chart01We tend to favor REITs whose rapid growth translates into cash flow growth on a per share basis. Speaking of one such REIT, Medical Properties Trust has been on our watch list in the healthcare segment. The company’s portfolio has enjoyed a strong expansion over the past year increasing from 134 to 187 properties. The annual adjusted EBITDA for the 2015 fiscal year is projected to increase 69 percent over the 2014 figure. In addition, Medical Properties continued to post strong figures in Q3. On a year over year basis, revenues grew 42 percent and normalized funds from operations (FFO) per share went up 19 percent.

chart02In August the company tested the boundaries of their acquisition based model by issuing equity in a bad moment. In a matter of days they reduced a public offering of 43.8 million common shares to 26.0 million. The demand was simply not there, and not long after the market in general suffered from a major selloff. This most definitely negatively affected Medical Properties’ ability to fund new acquisitions.

Company Chairman, President, and CEO Edward Aldag announced, in his third quarter conference call, that the company would slow down their acquisition pace over the next few quarters. He stated,

“if you look at where we’ve been over the last two years with doing over $1 billion in the last two years, and $1 billion this past quarter, we certainly do expect that you won’t see that type of investment in the near future.”

chart03The last time we featured Medical Properties Trust was in early October. At that time the company demonstrated good valuation opportunities. Their dividend yield was above the median sector and price-to-FFO was below it. According to the November 30 figures, Medical Properties dividend yield is at 7.3 percent versus the 5.8 percent for the healthcare segment, and the price-to-FFO is at 10x; which is lower than the industry average of 12x. This proves that the opportunity remains.

Source: Medical Properties Trust (NYSE:MPW), Seeking Alpha

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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