800-742-7730     This email address is being protected from spambots. You need JavaScript enabled to view it.     Offices     News     Family of Companies

NHLD logo
NAM Logo
NationalInsurance Logo
vfin logo
GC logo

Post Properties, Inc. - Initiation Note

Post Properties, Inc.

Neutral (PPS, $54.42)

Shares Trade at a Premium to Universe. Initiating with a Neutral Rating and a $47 Price Target

August 12, 2014

John R. Benda


This email address is being protected from spambots. You need JavaScript enabled to view it.

Investment Conclusion. We are initiating coverage of Post Properties, Inc. (PPS) with a Neutral rating and $47 price target based on a blended net asset value (“NAV”), dividend discount model (DDM), and Price/Funds From Operations (“P/FFO”) valuation method. This Neutral rating is negatively biased not because of operational issues with PPS, rather due to a current valuation premium being unwarranted based on our assessment that the fundamentals do not support it. We feel that the market has overextrapolated recent dividend raises and driven shares up so that PPS currently yields 2.58%, a rate below the 10-year Treasury yield we add, as merely catch-up raises that other firms initiated years ago. Our price target is derived from an equally weighted blend of our $48.43 Net Asset Value (“NAV”) estimate, $45.21 Dividend Discount Model (“DDM”) estimate and $46.26 Price/Funds From Operations (“P/FFO”) model estimate. Our $47.00 price target implies an annual total return, including the current 2.9% dividend yield, of (10.5%) at the current stock price of $54.42.

PPSSource: Capital IQ, National Securities Corporation Estimates

Dividend Raises Rallied Shares Past Fundamentals. Currently, PPS is trading at premiums to the entire MF Rental REIT on various core metrics, yet we believe the fundamentals do not justify them. For the group, the current P/NAV is a 0.96x average and 0.99x median value, yet PPS is trading at a 1.06x value. For the group, the current P/FFO valuation average is 16.52x coupled with a 16.71x median, yet PPS is trading at 21.66x. On May 23, 2013 and May 8, 2014 PPS announced two dividend raises that optically seem to be ahead of the peer average and have likely rallied the stock, but we note PPS’ last annual dividend is still below its $3.12 peak reached in 2002 and that PPS cut its dividend the most in our coverage group during the downturn.

Executing on Net Asset Sales and Pausing Portfolio Growth Until 2015. According to management on a recent earnings call, “Beyond working on the development projects that make sense, this year will be one of net asset sales. We are targeting to sell $200 million to $250 million of existing assets, with the proceeds reinvested primarily in a mix of debt reduction, special dividends and share buybacks.” We believe the MF rental...

Request Document

Important Disclosures

This publication does not constitute and should not be construed as an offer or the solicitation of any transaction to buy or sell any securities or any instruments or any derivatives of the securities mentioned herein, or to participate in any particular trading strategies. Although the information contained herein has been obtained from recognized services, and sources believed to be reliable, its accuracy or completeness cannot be guaranteed. Opinions, estimates or projections expressed in this report may make assumptions regarding economic, industry, company and political considerations, and constitute current opinions, at the time of issuance, which are subject to change without notice.

This report is being furnished for informational purposes only, and on the condition that it will not form a primary basis for any investment decision. Any recommendation(s) contained in this report is/are not intended to be, nor should it / they construed or inferred to be, investment advice, as such investments may not be suitable for all investors. When preparing this report, no consideration to one’s investment objectives, risk tolerance and other individual factors was given; as such, as with all investments, purchase or sale of any securities mentioned herein may not be suitable for all investors. By virtue of this publication, neither the Firm nor any of its employees shall be responsible for any investment decisions. Before committing funds to ANY investment, an investor should seek professional advice. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice, or to be used by anyone to provide tax advice. Investors are urged to consult an independent tax professional for advice concerning their particular circumstances. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, either expressed or implied, is made regarding future performance.

National Securities Corporation (NSC) and its affiliated companies, shareholders, officers, directors and / or employees (including persons involved with the preparation or issuance of this report) may, from time to time, have long or short positions in, and buy or sell the securities or derivatives (including options) thereof, of the companies mentioned herein. One or more directors, officers, and / or employees of NSC and its affiliated companies, or independent contractors affiliated with NSC may be a director of the issuer of the securities mentioned herein. NSC and / or its affiliated companies may have managed or co-managed a public offering of, or acted as initial purchaser or placement agent for a private placement of any of the securities of any issuer mentioned in this report within the last three (3) years, or may, from time to time, perform investment banking or other services for, or solicit investment banking business from any company mentioned in this report.

This research may be distributed by affiliated entities of National Securities Corporation (NSC). Affiliated entities of NSC may include, but are not limited to, vFinance Investments, Inc., National Asset Management and other subsidiaries of our parent company, National Holdings Corporation.

The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and the income they produce if any, may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Furthermore, NSC may follow emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This report does not take into account the particular investment objectives, financial situation or needs of individual investors. Before acting on any advice or recommendation in this material, the investor should exercise independent judgment as to whether it is suitable in light of his/her particular circumstances and, if necessary, seek professional advice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.

Additional information relative to securities, other financial products, or issuers discussed in this report is available upon request. Neither this entire report, nor any part thereof, may be reproduced, copied or duplicated in any form or by any means without the prior written consent of National Securities Corporation. All rights reserved. NSC is a member of both the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC).

For disclosures inquiries, please call us at 1-800-417-8000 and ask for your NSC representative, or write us at National Securities Corporation, Attn. Supervision Department, 410 Park Avenue, 14th Floor, New York, NY 10022, or visit our website at www.nationalsecurities.com

NHLD logo
NAM Logo
NationalInsurance Logo
vfin logo
GC logo

Newsletter Sign Up

News letter