Analysis: The Market Has Oversold Shares Of Sabra Health Care REIT With A Catalyst On The Horizon

With Sabra Health Care REIT Inc SBRA down 16.6 percent since it announced its purchase of Care Capital Properties Inc in May, JMP Securities sees a buying opportunity.

Analyst Peter Martin upgraded the stock Tuesday expecting a catalyst in Sabra’s upcoming investor call and pro-forma guidance as well as a 9-percent yield from its merger with Care Capital.

The anticipated deal gains align with expectations from Egan-Jones and Glass Lewis, which in August urged investors to vote in approval in spite of opposing assessments. Eminence Capital and Hudson Bay Capital had earlier rejected the proposition, with the latter asserting that the $7.4 billion transaction “could prove fatally expensive” to shareholders.

“Based on this drastic decline in Sabra shareholder value, it is clear to us that the strategic rationale of the CCP Acquisition, as stated by Sabra management, has not been accepted by the market and the CCP Acquisition is not in the best interests of shareholders,” Hudson Bay wrote in a July open letter.

At its post-announcement nadir, Sabra had traded down 22.4 percent.

Mizuho Securities corroborated negative sentiments with a downgrade to Sell ━ notably, Sabra’s only such rating. The Street now has four Buys and three Holds on the stock, with recent upgrades from both Jefferies and JMP.

Martin maintains a $23 price target on the stock, foreseeing a 10-percent premium in net asset value representing discounts of 8-percent and 16-percent to industry peers Omega Healthcare Investors Inc OHI and CareTrust REIT Inc CTRE.

At the time of publication, Sabra was trading at $22.43.