Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stock tips as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.
This week we had a question from an Inner Circle member concerning a proprietor of retirement homes in Canada. Amica Mature Lifestyles aims its appeal to members of the baby boom generation who are looking for luxury residences. Pat analyzes the company’s business and looks at its prospects as a premium brand competing in a growing retirement home market.
Q: Dear Patrick: I would be interested in your opinion on Amica Mature Lifestyles, which runs a number of high-class retirement homes. My wife and I have recently inspected one here in Victoria and were very impressed. With the aging population, there must be a good opportunity for growth here. Thank you.
A: Amica Mature Lifestyles Inc. (symbol ACC on Toronto; www.amica.ca), manages, develops and markets luxury housing for seniors.
Amica now owns or has interests in 26 residences, including two under development. These properties are in B.C., Alberta and Ontario, with a focus on the Greater Toronto and Greater Vancouver areas.
When all of its buildings are complete, the company will have a total of 3,623 suites. Amica caters to an affluent market, with rent starting at more than $3,000 a month for a one-bedroom suite.
The company owns 100% of 12 properties (which include 1,492 suites) and has interests in the other 14 (which include 2,131 suites). Amica’s occupancy rate is 94.1%. About 20% of the suites in each building are for assisted living, and 80% are for independent living.
Amica strengthens stake in properties with 99-year management contracts
While the company holds only part ownership in most of its properties, it has 99-year management contracts on all of them, with a base management fee of 6% of revenue plus performance fees. In addition, Amica earns design and marketing fees during new projects’ construction and development phases.
In the three months ended February 28, 2014, Amica’s revenue rose 8.0% to $34.8 million from $32.2 million a year earlier. The rise mostly came from the acquisition of increased stakes in some residences. Cash flow per share rose 10.0%, to $0.11 from $0.10.
Amica pays a quarterly dividend of $0.105 a share. The stock yields 5.3% on an annualized basis.
In the Inner Circle Q&A, Pat examines the outlook for Amica, balancing the rising demand for luxury residences from a retiring baby boom generation against the company’s financial outlook and the risks of operating in a highly competitive market. He concludes with his clear buy-hold-sell advice on this stock.
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