Hello My Friends,
On February 12, 2014 Dan asked me to investigate the opportunities around two income trusts he was considering. Today I will examine the case for HealthLease Properties Real Estate Investment Trust (HLP.UN TSX). Dan thought it was well positioned in a growing market for upper end senior’s housing.
The trust manages a portfolio of properties in the United States and Western Canada that includes Specialized Nursing Facilities, Long Term Care Facilities and Assisted Living Facilities. The yield on distributions is 8.25% while the market capitalization os $263.88 million. The average daily volume over the last three months is 53,745 shares.
An inspection of the charts will support my thoughts on these units.
The two-year chart indicates that the units hit a double top in May of 2013 that started a decline that lasted into December of that year. The move lower shaved over $2.00 off the trading price. The units broke above the downtrend line in January of 2014 and have started a new advance that has broken above the 50 and 200-day moving averages. Also worth mentioning were the sell signals generated by the MACD and the RSI in May of 2013 and the buy signals in December.
The six-month chart provides a close-up of the resistance that has surfaced near $10.40 and the neutral posture of the momentum indicators. The research conducted on Dan’s behalf has found that CIBC initiated coverage on the units in January rating the units an outperform with a target price of $11.50. The good thing about having an analyst cover a REIT is that it gets the story out to all the brokers at the firm who will then inform their clients.
The best way to approach HLP.UN is to buy it for income. The yield is generous and the units have broken out of the downtrend that took it to a 52-week low of $9.27. The trust’s approach to offering a growing senior’s population facilities will more appeal will help separate it from the competition.
Make it a profitable day and happy capitalism!