McMurtry Investment Report & Model Portfolios

Adding Sienna Senior Living, SIA.TO, to both portfolios in the Reit sector

January 31, 2025

I am adding another Canadian Reit in the Seniors Healthcare industry, Sienna Senior Living.

During COVID, the senior living sector was pummeled in Canada with seniors afraid of moving into these homes while at the same time the supply of new homes was sharply increasing. Today the reverse is happening with the demand greater than the supply. This is resulting in a higher pricing environment which is positive to industry profitability.

On a trailing twelve month basis, Sienna is trading on a price to funds from operations basis of 12.72 times, significantly cheaper than Chartwell’s 21.670 times. The main reason Sienna is cheaper is that about half their business is from chronic care facilities with the other half from seniors housing. Chronic care facilities are all government regulated in regards to pricing, while this is not the case for seniors living.

Despite Sienna’s less profitable product mix, growth in funds from operations on a year over year basis was up 87% and 22.74% on a TTM and quarterly basis respectively. Projections for growth in 2025 call for a flat year over year growth in EBITDA with growth in EBITDA of 10% resuming in 2026.

Sienna only operates in 4 provinces- BC, Ontario, Saskatchewan and Alberta with chronic care facilities only in BC and Ontario.

The company expects solid growth in seniors ling with $300 million of new properties under construction. In addition new accretive acquisitions in seniors living are expected in the seniors living area.

In regards to its chronic care facilities, the company expects a slow, but steady improvement in net operating income with government funding more than offsetting cost inflation.

The company offers a dividend yield of 5.91% with a funds from operations dividend payout at a very sustainable 75%.

Recommendation

I recommend an investment in both Sienna and Chartwell at this time.

 

 

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