MLV & Co Sees Attractive Value from Sabra Health Care REIT

In a report published Tuesday, MLV & Co analyst Paul Morgan reiterated a Buy rating and $31.00 price target on

. In the report, MLV & Co noted, “Sabra's $550M portfolio acquisition of 21 private-pay, Holiday Retirement communities weighed on SBRA shares today, with the stock trading down 5%. While the associated 6M share equity offering was an immediate-term catalyst, the 5.5% cash yield on the deal potentially reinforces skepticism about valuation premia for large senior housing deals. For this specific transaction, we see strategic merits as key compensating positives for Sabra, pushing private pay to a majority of revenues, and accelerating the march toward an investment grade cost of credit. The combination gives Sabra ammunition to spur future accretion from its smaller “bread and butter” deals, of which the company quietly announced $100M to close over the next 60 days. We model the Holiday deal as roughly neutral to AFFO, though materially positive to normalized FFO due to strong lease escalations. With SBRA down 15% this month, we see attractive value for opportunistic investors and reiterate our Buy rating and $31 price target.” Sabra Health Care REIT closed on Monday at $24.25.