This healthcare stock is a ‘best buy’

Analysts follow as many as 20 stocks, most of which are rated “buys.” Of those buys, an analyst has one or two special favorites seen as most suitable for new buying. For Mike Vinokur, vice-president and portfolio manager at Trapeze Asset Management in Toronto, this healthcare stock, an open ended real estate investment trust specializing in healthcare and medical real estate properties, is just such a best buy.

Paul Dalla Lana is CEO of NorthWest Healthcare Properties REIT (TSX─NWH.UN). And when making any decisions about that Toronto-based company, it’s a good bet he’ll keep this healthcare stock’s shareholders’ needs at top of his agenda.

That’s because Mr. Dalla Lana owns a whopping 33.5 per cent of NorthWest’s stock.

But for Mike Vinokur, a high net worth portfolio manager with Toronto’s Trapeze Asset Management, such a high level of insider ownership is just one reason NorthWest is on his list of top healthcare stocks to buy.

He also appreciates that it now trades at a 13 per cent discount to what he views as its net asset value: $9.65 a unit.

Net asset value likely to grow

In addition, its NAV is likely to grow, Mr. Vinokur believes, given NorthWest’s leasing activity, its aggressive buyback of its units, as well as its financial flexibility to make acquisitions.

Then, too, unlike most Canadian-based REITS, NorthWest is geographically diversified, boasting holdings in Brazil, Germany, Australia and New Zealand, as well as Canada.

Moreover, because of its international exposure, the average term of its leases is 9.4 years — 4.8 years longer than the average term for leases on its Canadian properties.

And the longer a REIT’s leases are, the more visible are its earnings and the more certainty there is about its cash generation, says Mr. Vinokur, who adds that at 95 per cent of its cash flow, NorthWest, unlike some REITs, isn’t guilty of overpaying.

For Mr. Vinokur, NorthWest Healthcare is a best “buy” — one with a 12-month price target of $10, as well as a cash flow estimate for 2016 of $1 a unit.

With more than 120 properties, NorthWest boasts 7.8 million square feet of gross leasable area.

In Canada, this healthcare stock is the biggest non-government owner and manager of medical office buildings and healthcare facilities with 74 properties from coast to coast, including big clusters in Halifax, Quebec City, Montreal, Toronto, Calgary and Edmonton.

Company swings to net income from net loss

For the three months ended June 30, NorthWest swung to net income of $153 million from a net loss of $8.9 million for the similar period in 2014. Net operating income was also higher, rising to $34.1 million from $10.2 million.

For the six months ended June 30, NorthWest swung to net income of $155.8 million from a net loss of $35.9 million, for the similar period in 2014. Net operating income presented a brighter picture as well, jumping to $58.1 million from $19.9 million. 


Investor’s Digest of Canada, MPL Communications Inc.
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