VICI Properties (VICI) Could Be 46% Undervalued As Its Alberta Rent Stream Holds Flat

VICI Properties (VICI) just reshaped its Canadian footprint, agreeing to a new triple net lease with Highfield Investment Group for two Alberta racetrack properties while keeping its total rent intake unchanged.

For context, VICI Properties has seen its share price drift lower in recent months, with a 30-day share price return down 10.9% and a 90-day move down 15.2%. The 1-year total shareholder return is down 25.7%, pointing to fading momentum even as the Canadian lease reshuffle and the recent addition of experienced developer John M. Sullivan to the board keep the operational story moving forward.

Spot fresh ideas in the same real estate and income theme by scanning our curated list of 7 dividend fortresses.

VICI Properties now trades well below recent levels, even as its rent stream from these racetracks is held flat. Is the recent slide already pricing in most of the pain, or is the upside already largely spent?

Most Popular Narrative: 46% Undervalued

At a last close of $22.65 versus a narrative fair value of $41.86, VICI Properties screens as heavily discounted on this framework, which is built from detailed revenue, margin and capital cost assumptions.

Given the heavy focus of R.E.I.T.s in rewarding their shareholders with dividend payouts, resulting in VICI paying around ~70% of its Free Cash Flow in dividends, we will value the company using a Dividend Discount Model (DDM), using a variable approach, given the ability the company still has of growing its dividends above economy growth rate.

Using this valuation method we can extrapolate that VICI is undervalued given that its current price of 26 dollars is well below the P10. From this we can say that there is more than ~90% probability of VICI being undervalued.

See why 21 investors see VICI Properties as 46% undervalued.

Result: Fair Value of $41.86 (UNDERVALUED)

Still, the VICI Properties story leans heavily on continued access to capital and tenant health, so weaker funding conditions or operator stress could quickly challenge this undervaluation case.

Find out about the key risks to this VICI Properties narrative.

Next Steps

Sentiment on VICI Properties is mixed, with clear concerns and some optimism pulling in opposite directions. Consider taking prompt action, reviewing the numbers yourself, and weighing the 5 key rewards and 1 important warning sign.

Looking for more VICI Properties style investment ideas?

If you want a broader watchlist alongside VICI Properties, use the Simply Wall Street Screener to surface fresh income, value and resilience themes before they slip past you.

• Target potential mispriced opportunities early by scanning the 31 high quality undervalued stocks that filter for quality alongside pricing signals.
• Strengthen the defensive side of your portfolio by reviewing a list of solid balance sheet and fundamentals (25 results) that can better handle shocks.
• Spot potential future favorites before the crowd by checking out 19 high quality undiscovered gems with strong fundamentals that often sit off the usual radars.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com