Joint Ventures With BlackRock And Healthy Liquidity Position Will Support Future Prospects

Key Takeaways

• Expanding investment ventures and strategic partnerships, such as with BlackRock, bolster income assets, potentially driving revenue and improving net margins.
  
• Strong liquidity, hedging strategies, and property sales support stable cash flow and earnings, positively impacting revenue opportunities and overall financial health.
  
• Potential market and legislative changes could compress Greystone's future revenue, while geographic concentration and hedging risks impact margins and earnings stability.

Catalysts

Acquires, holds, sells, and deals in a portfolio of mortgage revenue bonds (MRBs) that are issued to provide construction and permanent financing for multifamily, student, and senior citizen housing; skilled nursing properties; and commercial properties in the United States.

• Greystone Housing Impact Investors is actively expanding its investment pipeline, including joint ventures such as the construction lending JV with BlackRock. This new venture allows the company to fill gaps left by traditional lenders and can significantly boost their income-producing asset base. This is likely to positively impact revenue growth.
  
• The company emphasizes a hedging strategy that provides stable net cash flows despite interest rate fluctuations. Their previous strategy led to significant net swap payments, which could continue to bolster earnings and stabilize net margins.
  
• They are exploring opportunities to enhance returns from joint venture equity investments, such as their construction lending joint venture with BlackRock. This could lead to expanded revenue and improved net margins through increased returns on investments.
  
• Greystone has a healthy liquidity position and recently added liquidity through multiple events, allowing them to fund current commitments and potentially capitalize on new investment opportunities, which could positively impact earnings and revenue growth.
  
• The ongoing stabilization and sale of properties within their Vantage and Freestone joint ventures, despite challenges like insurance premium increases, provide opportunities for realizing gains on investments, potentially enhancing revenue and improving earnings.

Greystone Housing Impact Investors Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Greystone Housing Impact Investors's revenue will grow by 67.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 54.5% today to 28.3% in 3 years time.
• Analysts expect earnings to reach $42.9 million (and earnings per share of $1.73) by about March 2028, up from $17.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.3x on those 2028 earnings, down from 17.3x today. This future PE is lower than the current PE for the US Diversified Financial industry at 15.4x.
• Analysts expect the number of shares outstanding to decline by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

Greystone Housing Impact Investors Future Earnings Per Share Growth

Risks

• The decline in the fair value of Greystone's mortgage revenue bond portfolio could negatively affect perceptions of the company's asset base and long-term revenue potential, despite being long-term holders of these investments.
  
• Interest rate sensitivity and reliance on hedging strategies present risks, especially since a 200-basis point increase in rates could decrease net interest income and cash available for distribution (CAD) by approximately $2.5 million, impacting earnings.
  
• Greystone's heavy geographic concentration of mortgage revenue bonds in California, Texas, and South Carolina, with significant exposure to market fluctuations in those states, may lead to potential revenue and asset valuation volatility impacting net margins.
  
• The potential impact of changes in the muni bond market and federal tax legislation could affect the financing costs and availability for Greystone's projects, which might compress future revenue and profit margins.
  
• Insurance premium increases in certain areas, as experienced with the Tomball asset, could lead to higher operating costs that reduce investment profitability and ultimately affect distribution capabilities.

Valuation

• The analysts have a consensus price target of $16.625 for Greystone Housing Impact Investors based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $152.0 million, earnings will come to $42.9 million, and it would be trading on a PE ratio of 12.3x, assuming you use a discount rate of 11.4%.
• Given the current share price of $13.15, the analyst price target of $16.62 is 20.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.