Care Capital turns bullish on impressive FY2016 outlook

Care Capital Properties (CCP) reported a decline in the fiscal 2016 first quarter funds from operations (FFO), compared to the prior year similar period. The FFO data is the most watched after data as far as a real estate investment trust (REIT) is concerned.

Following a spin-off from Ventas, Inc. (VTR), the REIT began operating as an independent company in August 18, 2015.

The shares of the Care Capital Properties declined 1.19% to $27.35, following the announcement of first quarter results which were below expectations.

For the fiscal 2016 first-quarter, the normalized FFO declined to $66.61 million or $0.80 per share, from $71.551 million or $0.86 per share in the similar period of 2015. The first quarter FFO, as defined by the National Association of Real Estate Investment Trust (NAREIT), declined to $63.804 million or $0.76 per share, from $68.303 million or $0.82 per share in the corresponding period of fiscal 2015.

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Similarly, the first quarter net income was $29.766 million or $0.36 per share, compared to $37.221 million or $0.44 per share in the year ago corresponding quarter. However, it should be noted that the fiscal 2016 first-quarter revenue has increased considerably to $84.543 million, from $78.573 million in the prior year similar period.

Furthermore, the healthcare real estate investment trust successfully entered into an agreement to receive $200 million unsecured term loan repayable in seven years. Care Capital intends to use the proceeds to repay a portion of its $600 million unsecured term loan due in 2017. Simultaneously, for the $600 million debt, the company entered into a swap agreement under which the interest for $200 million loan was fixed at 3.25%, while the interest for the $400 million loan (due 2020) was fixed at 2.73%.

Care Capital paid a cash dividend of $0.57 per share on March 31, 2016. This represents a dividend payout ratio of 71% of first quarter’s normalized FFO. The company maintains excellent liquidity. At the end of the first quarter ended March, the REIT had $450 million of free borrowing capacity under the revolving credit facility.

Care Capital also issued its fiscal 2016 FFO outlook. The company expects the fiscal 2016 normalized FFO to range from $2.85 to $2.95 per share. The fiscal 2016 NAREIT FFO is anticipated to range between $2.80 and $2.90 per common share. Thus, fundamentally, the share price is poised for an uptrend in the weeks ahead.

The stock is currently trading near the major support at $26.80. Technically, as the chart indicates, the share is trading firmly above the 50-day moving average. The RSI reading has crossed above the reading of 50 for the first time in the past five months. Thus, it is imperative that the stock will break the major resistance at 32.

To earn money from the probable uptrend, a binary options trader should purchase a one touch call option contract. The suggested target price for the one touch call option contract is $32 or lower. Similarly, to increase the chances of making money from the trade, the expiry date of the contract should fall in the second week of June.