HCP Inc NYSE HCP Financial Industry Group 4202011
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HCP Inc. (NYSE: HCP) Financial Industry Group 4/20/2011
Agenda � What is a REIT? � Overview of HCP � Financial Analysis � Technical Analysis � Reasons to buy � Conclusion
What is a REIT? �A Real Estate Investment Trust (REIT) is a corporate structure that invests directly in real estate through properties or mortgages � Advantages � Diversified, of REITs liquid investment in real estate � Avoids corporate tax by distributing 90% of income
HCP � HCP a hybrid REIT focused on the healthcare industry � “We acquire, develop, lease, manage and dispose of healthcare real estate, and provide financing to healthcare providers” � Long term leases to established companies � Sector and Geographic Diversification � Some mezzanine loans secured by real estate � Triple Net Lease
HCP Portfolio- $14. 5 Billion
Key Numbers � Market Cap: $15. 32 B � Shares Outstanding: 401. 51 M � FFO/Share: � Revenue: � Beta: $2. 02 $1, 095 B 1. 29 � Debt/Capital: � Credit . 36 Rating: BBB+, very recently improved
REITS and FFO • REIT stocks are often evaluated on their Funds from Operations multiple) instead of the P/E Ratio commonly used for other companies. • The metric takes into account earnings from existing properties but not cash from acquisitions or sales of assets. It measures the cash-generating potential of the REIT's holdings (IE, via rental income from tenants). • FFO is obtained from a company's net income, excluding any gain on real estate sold during the period and excluding any depreciation/amortization.
HCP – Earnings Scorecard
Cash is King
Revenues • HCP reported total revenues of $341. 4 million during the quarter compared with $294. 5 million in the year-ago period.
Liquidity - Solvency • HCP's fixed charge coverage was 2. 6 times (x) for the trailing 12 months (TTM) ended Dec. 31, 2010 as compared to 2. 3 x for TTM ended Dec. 31, 2009. Additionally, projected fixed charge coverage levels are expected to remain at or above 3. 0 x beginning in 2011. • HCP's debt maturity schedule is well-laddered, with less than 12% of debt maturing on an annual basis through 2015. • April 14 th: Fitch Upgrades HCP's IDR to 'BBB+'; Outlook Stable
Technical Analysis- 2 year chart
1 year chart
6 month chart
Reasons to Buy
Demographics driving the demand On a per capita basis, the 75 -year and older segment of the population spends 76% more on healthcare than the 65 to 74 -year-old segment and over 200% more than the population average.
Health Care Industry � Single largest industry in the U. S. based on GDP � National health expenditures expected to grow by 4. 2% in 2011 � Average compounded annual growth rate for national health expenditures from 2009 through 2019 is anticipated to be 6. 3%
Review � Strong balance sheet- increasing their Funds from Operation � Increased dividend for 26 consecutive YEARS � Stock � Add in a good position to buy diversity to the portfolio � Demographic/GDP � Government � Will play budget not a huge concern for HCP report Q 1 earnings on May 3 rd, 2011
Conclusion Buy FULL position for a long term (2 year) play
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