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EastGroup Properties, Inc.“In early December, we initiated coverage of EastGroup Properties with a Long-term Buy rating based on the investment thesis that, while results would be down near-term, occupancy trends are improving and the stock appeared undervalued.
EastGroup reported fourth quarter results that slightly beat our forecast. FFO per share were $0.64 versus $0.67 and compared to our $0.63 estimate. After bottoming in the first period, occupancy at 92.2% has now improved three consecutive quarters.
We are maintaining our $2.48 FFO per share forecast for 2003. While this implies the second down year in a row, we expect the second half of 2003 to show a modest improvement year-over-year.
Long-term shareholders have done well with this well-managed industrial REIT. EGP has provided shareholders 18% compounded annual total return (price appreciation plus dividend yield) for the past 10 years, 19% in 2002. The company has raised the dividend for 10 consecutive years including a 4.4% increase last year.” (February 19, 2003)
“We rate shares of EastGroup Properties 2H (In-Line, High Risk) in the context of our Marketweight recommendation on the REIT universe. We view EastGroup's focus on multitenant distribution facilities in Sunbelt markets as a positive, given the shift in the economy toward movement, rather than storage, of goods. The shares trade at discount to the focused industrial sector on an FFO multiple basis, and sport an above-average dividend yield.”(February 14, 2003)
“As of December 31, 2002, EGP had approximately $322.3 million of debt outstanding, which represents 38.1% of the company's total market capitalization. The weighted average interest rate of the company's debt is 6.3%. In our opinion, EGP maintains solid coverage ratios, despite facing a challenging environment. At quarter-end, the interest coverage and fixed charge coverage ratios were 3.9X and 3.2X, respectively. EGP continues to employ relatively conservative accounting practices. .” (February 13, 2003)
“We maintain our Market Perform rating on EastGroup shares, which still currently provide a secure 7.6% dividend yield. We continue to search for a catalyst to boost the industrial sector and drive the company’s shares price higher, but believe is still early to call a turn in fundamentals for the sector. However, we continue to believe the sector will be among the first of the various property sectors to benefit from the renewal of growth in the economy, given that the pace of new supply has slowed significantly and that demand in the industrial sector correlates with GDP growth.” (February 14, 2003)