In this article, we’ll be summarizing a bullish thesis posted on VIC covering Curbline (NYSE:CURB), in October, when the stock was trading at $24. Currently, CURB stock is trading at $24.26, which shows that the stock hasn’t moved much since the publication of this thesis. Nonetheless, CURB stock is now trading at a trailing-twelve-month TTM EV/EBITDA ratio of 33, and the stock is trading at 23 times, TTM sales estimates.
Newly spun-off convenience retail REIT, Curbline (CURB) emphasizes owning and running convenience-oriented shopping complexes in very affluent, highly populous areas. 78 properties rented to need-based tenants including eateries, medical offices, fitness centers, and liquor stores make up its portfolio. These properties have special benefits including low capital intensity, greater NOI growth because of shorter lease terms, and strategic locations that encourage regular client visits; they are free from e-commerce pressures. Because single-story retail projects are typically economically unviable in prime locations, CURB gains from a natural moat and limited new supply in the sector.
Strong operating conditions underlie CURB’s principles; with yearly free cash flow (AFFO) potential to rise by around 10% and over 60% NOI-to-AFFO conversion achievable, With $800 million in cash, the company is capitalized with over $1.2 billion in acquisition capability, which will propel notable expansion as it effectively uses money.
Under seasoned CEOs David and Conor, management is known for their strategic capital deployment. Their spin-off from Site Centers to generate value shows clearly their dedication to maximizing CURB’s performance. Leveraging its cost-of-capital advantage to allocate funds at rates far above its projected cap rate, CURB is expected to expand AFFO 2.5x without the need for equity issuances.
One more benefit is the institutionalization of convenience retail assets. Currently undervalued in relation to more general retail, these assets should experience more capital flow and cap rate compression as institutional ownership rises. CURB is positioned as a robust, long-term compounder with great secular and cyclical growth possibilities since 70% of its tenants have national credits and there is minimal cyclicality in tenant demand. This makes the underpenetrated convenience store sector an appealing investment.
Curbline (CURB) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. Moreover, while acknowledging the potential of CURB stock as an investment, a few AI stocks hold greater promise for delivering greater returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CURB but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
