CBL & Associates Properties, nicknamed the “Only Game in Town,” appears to be working its way up, after the recent crisis. Following the news that the SEC had been investigating the REIT has caused a drop in the share price. But during this month the stock finally surged and spiked up to 20%. It was not long after that when the market timers started to recommend that the stock is a buying opportunity. After reviewing the financial results, and the history they could be right, but is it really a quality investment?
While the SEC accusations seemed to be very bad at the beginning, the company has been able to respond and reduce their importance. The confusion all started when the Wall Street Journal back in May mentioned the SEC was investigating the company for accounting fraud. There was even a link to Donald Trump because a potential vice president had profited from the stocks, needless to say the company promptly denied any wrongdoing. Then weeks later the company issued a press release which said that they had discovered that the SEC was looking into four secured loans that dated between 2011 to 2012. The company also hired Ernst & Young to conduct an independent investigation.
The damages done to the stock was severe. The share price reached its lowest point since late June of 2009 at $8.86. During this month, the stock has rebounded and is now trading around $11. The multiple at 7 times AFFO is still considered to be cheap when it is compared to its peers. In fact, the share price needs to triple in order to approach multiples that are equivalent to its successful peers, which is unlikely.
The company is able to check most of the items that the investors get excited about, which can include dividend payout, consistent dividend paying history, seasoned management, and dividend yield. The REIT is a part of a low productivity malls that have been plagued by secular threats to malls. Due to the bankruptcies, last year, 175 stored were closed and the company lost 310 basis points in occupancy. The company was able to find the other tenants and recoup most of the ground that was lost. But it might be too late since the episode exposed the company’s weak spots.
In conclusion, after reaching its lowest point CBL is starting to bounce back. Which is causing many of the investors to enjoy the ride, but this upswing could last a short amount of time.
PS. The company releases Q2-2016 results on Thursday 28.
Source: CBL & Associates Properties In(NYSE:CBL)
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Disclosure: The author is long FCH, XHR, and CLDT.