Oppenheimer Initiates Global Medical REIT Shares With Outperform Rating

Oppenheimer started coverage of Global Medical REIT Inc GMRE with an Outperform rating and $12 price target, implying a potential upside of 12 percent.

Exuding confidence on the management's experience, underwriting process, and discipline to grow the company, analyst Steve Manaker said "we estimate GMRE will achieve $0.25/share/quarter run-rate AFFO by year-end 2017."

Global Medical focuses on high-acute, newer, purpose-built facilities in secondary and tertiary markets that house key medical providers in a geography.

Manaker expects the REIT to buy $500 million of properties at an 8.5 percent GAAP yield; raise $205 million of debt; and raise an additional $185 million of equity.

The REIT's portfolio consists of 24 percent of LTC and 23 percent of MOB throughout the US, with 24 percent in Nebraska and 20 percent in Tennessee.

The analyst feels the timing is right for the REIT's strategy.

"The US healthcare industry is expected to continue to expand with an aging population, increasing healthcare spending and with clinical care shifting towards outpatient facilities. With minimal competition, we expect GMRE to execute in a disciplined manner and roll up a portfolio at attractive prices," Manaker wrote in a note.

Manaker expects 2016E and 2017 FFO and AFFO per share of $0.32/$0.36 and $0.96/$1.02, respectively. The analyst set a NAV of $10.44/share using a 7.5 percent cap rate.

"We do, however, expect NAV to move around due to the timing of capital raises and acquisitions. We assume a $0.20 quarterly dividend, which represents 80% payout on our $0.25/share run-rate AFFO estimate," Manaker added.

At time of writing, shares of Global Medical rose 1.58 percent to $10.90.