BMO initiates coverage of 3 REITs

Initiations

BMO Capital Markets analysts Ari Klein and John Kim initiated coverage of Boca Raton, Fla.-based SBA Communications Corp. at "market perform."

The price target was set at $260 and implies a roughly 19x multiple on BMO's 2024 adjusted funds from operations per unit estimate.

The analysts expect higher domestic growth for the owner and operator of wireless communication infrastructure in 2023 due to elevated international churn and the 5G rollout in the US. "We remain constructive on the domestic growth opportunities in the US, but we believe international markets offer outsized growth potential as they continue to invest in building out networks to support 4G/5G coverage and capacity to meet increasing demand in maturing markets," the analysts said.

While talking about risks the analysts noted that the real estate investment trust's "à la carte leasing approach" incorporates some elevated risk in a period of likely lower carrier activity.

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BMO Capital Markets analysts Ari Klein and John Kim initiated coverage of American Tower Corp., with an "outperform" rating and a target price of $230.

The analysts placed the price target on a 22x multiple on the communications REIT's 2024 adjusted funds from operations per unit estimate of $10.50.

"[American Tower's] performance in India has been negatively impacted by significantly elevated churn and a challenging business backdrop in the country, which has been an albatross to its overall performance that has commanded outsized attention relative to the rest of its business," the analysts said in a July 13 report.

The REIT is looking to sell an equity stake in its India operations, which might include a complete withdrawal from the market. "We believe a sale would help lower [American Tower]'s exposure to India and remove some of the noise and complexity associated with the market," the analysts said.

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BMO Capital Markets initiated coverage of Crown Castle Inc. The initial rating is "underperform" with a price target of $113 per share.

Ari Klein and John Kim set the price target on a 15x multiple of the REIT's 2024 adjusted funds from operations per unit.

Crown Castle's fiber solutions segment accounts for 28% of the REIT's total revenue. "Fiber business is currently dilutive to overall margin and yields and the timeframe to deliver on the promise remains unclear," the analysts said in a July 13 note.

The analysts expect Crown Castle's tower business can continue to expand in the mid-single digits regardless of the ups and downs.