Extendicare is a stable investment, says Euro Pacific Canada

A quarter that was in-line with his expectations confirms Extendicare’s (Extendicare Stock Quote, Chart, News: TSX:EXE) top standing as a quality eldercare service provider in skilled nursing and homecare services, says Euro Pacific Canada analyst Doug Loe.

Last Thursday, Extendicare reported its fourth quarter and fiscal 2015 results. In the fourth quarter, the company earned $34.3-million in revenue of $270.8-million. The company’s bottom line number was a 17 per cent improvement over the $29.3-million it posted in the same period a year prior.

“We continue to execute on our Canadian-focused strategy to grow across the continuum of seniors care and services,” said CEO Tim Lukenda. “We are pleased with our progress in building AFFO through the strategic deployment of proceeds from the sale of our U.S. operations. We expect continued growth across all segments of our business as we integrate our recent acquisitions and build off the strong platform we have established. We are firmly focused on building shareholder value over the long term,” Mr. Lukenda added.

Loe says the quarter was more evidence of Extendicare’s stability.

“Our investment thesis on EXE is unchanged and at its core, assumes that Extendicare’s nursing care/homecare/assisted living operations can adequately fund existing dividend policy ($0.48/shr annually) and with further operating income anticipated from assisted living occupancy expansion, we believe current dividend yield of 5.4% represents fair value for new investors,” he said. “Management projects AFFO contribution from newly acquired operations of $0.20/shr, $0.10/shr of which we assume is still expected from Revera Home Health as guided previously, and our projections are consistent with this expectation.”

In a research update to clients today, Loe maintained his “Buy” rating and one-year price target of $10.50 on Extendicare, implying a return of 17.3 per cent at the time of publication (22.7 per cent including dividend yield).