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Actual property possession is likely one of the finest paths to long-term earnings technology. Nonetheless, as with all asset class, valuation issues as shopping for too excessive can chip away at years of earnings.
That is why it might be worthwhile to layer into lesser adopted REITs that haven’t but been “found” by the mainstream market. This brings me to Gaming and Leisure Properties (NASDAQ:GLPI), which can be one such case. On this article, I spotlight why GLPI is a worthy decide at present costs, so let’s get began.
Why GLPI?
Gaming and Leisure Properties is one in all simply 2 publicly-traded REITs that focuses on proudly owning properties leased to gaming operators. At current, GLPI owns 55 properties diversified throughout 17 states, and will get greater than 85% of its lease from well-known publicly-traded gaming corporations comparable to Caesars Leisure (CZR), Penn Nationwide (PENN), Bally’s (BALY), and Boyd Gaming (BYD).
GLPI continues to show accretive development, with AFFO per share bettering by $0.02. GLPI continues to be a internet consolidator within the fragmented gaming phase with the current acquisitions of Stay! On line casino & Resort in Philadelphia and in Pittsburgh with the Cordish Corporations, bringing the full variety of acquired properties to 31 since GLPI went public in 2011. Each of those are prime quality regional operators that include very lengthy lease phrases of 39 years.
Wanting ahead, GLPI has loads of alternatives to pursue growth on its elevated asset base, as famous within the current press launch:
We’ve additionally positioned GLPI for future development alternatives with Cordish with our settlement to co-invest in all new gaming developments by which Cordish engages over a 7-year interval starting with the time limit of the PA properties.
Wanting ahead, GLPI is effectively positioned to drive additional development based mostly on our rising broad portfolio of blue-chip regional gaming belongings, shut relationships with our tenants, our rights and choices to take part in choose tenants’ future development and growth initiatives, and our skill to construction and finance transactions that we consider will likely be accretive to rental money flows. We consider these elements will help our skill to extend our money dividends and additional our purpose of enhancing long-term shareholder worth.
Dangers to the expansion thesis embody increased rates of interest, which raises GLPI’s price of debt. Nonetheless, this additionally will increase the alternative worth of GLPI’s present asset base. Additionally, macroeconomic uncertainty presents a danger for tenants, however the gaming sector has confirmed to be slightly resilient as demonstrated by its bounce again from 2020. Administration additionally famous strengths in tenant lease protection, as famous throughout the current convention name:
As macro uncertainty persists and the capital markets volatility is obvious, I wish to remind everybody on the decision in the present day that GLPIs enterprise mannequin was constructed with an setting like this in thoughts. In truth, our reported 4 wall protection has once more elevated throughout the portfolio with numerous leases now at all-time highs. This strong protection displays continued working resiliency, whereas it additionally offers a buffer or margin of security for our lease funds.
In the meantime, GLPI maintains a fairly protected quantity of leverage, with a internet debt to EBITDA ratio of 5.6x. The dividend was just lately raised by 2% and presently yields a decent 6.3%. It additionally comes with a protected 82% payout ratio, based mostly on Q1’22 AFFO/share of $0.86.
I additionally see GLPI as buying and selling with an affordable margin of security, with worth to annualized AFFO/share of 12.9. Promote aspect analysts have a consensus Purchase score with a worth goal vary of $47 to $61, with $53 on the midpoint, implying a possible one-year 26% whole return together with dividends.
GLPI Value Targets (Searching for Alpha)
Investor Takeaway
Gaming and Leisure Properties is an attention-grabbing choice for traders searching for a excessive yield mixed with regular development. The corporate has robust ties to a number of the greatest names in gaming, and its long-term lease agreements present stability and visibility. In the meantime, GLPI has loads of alternatives for each inner growth and exterior acquisitions. GLPI seems to be enticing on the present worth for prime earnings and development.
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