According to the Action for Seniors report published by the Government of Canada, in 2014, six million Canadians or 15.6% of Canada’s population was aged 65 or older. By 2030, that number is going to go up to 9.5 million or 23% of Canadians.
By 2036, average life expectancy at birth for women will rise to 86.2 years from the current 84.2 and to 82.9 years from the current 80 for men. This represents a great opportunity for companies in the senior living space.
As Canada continues to age, demand for excellent senior healthcare facilities will only go up. As an investor, you want to look at a company that can grow along with the aging population.
Sienna Senior Living Inc (TSX:SIA) is one of the best-known companies in the senior residency space in Canada. It has been in business for close to half a century and owns 70 retirement residences. Although its market cap is still below $2 billion, it could well zoom up in the coming decade.
Sienna announced their third-quarter results for 2019 last month and the numbers were on par with estimates. Revenue increased by 1.8% to $167.9 million in the third results 2019 compared to the prior-year period.
The increase was driven by additional and inflationary increases in flow-through funding in LTC (long-term care), as well as annual rental rate increases in the retirement portfolio.
Sienna looking to reduce debt balance
The LTC portfolio remained virtually at full occupancy at 98.2%. The company says there are waiting lists for each of their residences.
Third-quarter long-term care same property net operating income increased by 1.5% year-over-year. The average same property occupancy in the retirement portfolio was 86.9% in Q3 2019.
This dropped from 91.4% during the same period in 2018. Contributing factors to the occupancy softness are the oversupply in the Ottawa market, high attrition rates to LTC in the portfolio acquired in 2018, adjustments to the operating and sales platform, and property upgrades and renovations at a number of properties.
Sienna has worked on its debt this year as well. Debt to gross book value lowered by 180 basis points to 46.5% year-over-year.
Debt to adjusted EBITDA decreased year over year to 6.6 years from 6.9 years and the weighted average cost of debt lowered by 20 basis points to 3.7% year over year.
Subsequent to the third quarter of 2019, Sienna received a BBB investment-grade credit rating with a “stable” trend from DBRS, thereby highlighting the strength of its balance sheet and balanced portfolio.
Revenue increased by 5.3% (or $25.0 million) to $497.6 million, for the first nine months of 2019 over the comparable prior-year period.
What makes Sienna even more attractive is the forward dividend yield of over 5%. Sienna owns over 70 locations and owns 14 others in Ontario and British Columbia.
It also has the third-largest long-term-care facility portfolio in the country. When you take into account the growth potential of the industry, it makes sense to hold Sienna in your portfolio.
