Safety Income and Growth Inc SAFE

Safety Income and Growth Inc SAFE

Valueline Timeliness = 1

Investor's Business Daily Composite Score = 96

April 15, 2019 Price = $23.08

I started with a list of stocks with a 1 in either timeliness or performance from valueline and cross referenced that with a list of stocks that had at least a 94 composite number from investors business daily.   I then ran a quick SSG from better investing.  I am searching for stocks that are in the buy range.

Safety Income and Growth Inc

SAFE

The stock is in the buy range, but there are only a few years of historical numbers to work with.  I prefer at least 5 and love a good 10 years of historical sales and earnings to evaluate.

Recent history of insider transactions has all buys, so the managers of this company are optimistic.  

• 2018
 - Q4
• Quarterly Earnings Presentation
• This is a nice summary of the company put together to show during their last quarter earnings call.  It's a sales piece, but does a nice job of describing what the company does and has in the works.
• 
  

Safehold Enters Greater Philadelphia Market

NEW YORK --(BUSINESS WIRE)--Mar. 4, 2019-- Safehold Inc. (NYSE: SAFE) today announced its expansion into the Greater Philadelphia market, offering its modern, customer-friendly Safehold ground lease capital in unison with a leasehold loan from an institutional national bank to facilitate the

Safehold Closes Two More Transactions in Texas

NEW YORK --(BUSINESS WIRE)--Feb. 28, 2019-- Safehold Inc. (NYSE: SAFE) continues its expansion in Texas with two Safehold™ ground leases in high growth submarkets of Dallas-Fort Worth . Both transactions were closed with our repeat client Admiral Capital . This press release features multimedia.

Funds from Operations (FFO) is a higher quality measure of SAFE’s earnings compared to net income. This term is very common in the REIT investing world as it provides a cleaner look at its cash flow from daily operations by excluding impact of one-off activities or non-cash items such as depreciation. For SAFE, its FFO of US$8.7m makes up 40% of its gross profit, which means over a third of its earnings are high-quality and recurring.

Robust financial health can be measured using a common metric in the REIT investing world, FFO-to-debt. The calculation roughly estimates how long it will take for SAFE to repay debt on its balance sheet, which gives us insight into how much risk is associated with having that level of debt on its books. With a ratio of 2.8%, the credit rating agency Standard & Poor would consider this as aggressive risk. This would take SAFE 35.41 years to pay off using just operating income, which is a long time, and risk increases with time. But realistically, companies have many levers to pull in order to pay back their debt, beyond operating income alone.

Next, interest coverage ratio shows how many times SAFE’s earnings can cover its annual interest payments. Usually the ratio is calculated using EBIT, but for REITs, it’s better to use FFO divided by net interest. This is similar to the above concept, but looks at the nearer-term obligations. With an interest coverage ratio of 0.88x, SAFE is not generating an appropriate amount of cash from its borrowings. Typically, a ratio of greater than 3x is seen as safe.

https://simplywall.st/stocks/us/real-estate/nyse-safe/safety-income-growth/news/what-you-need-to-know-before-investing-in-safety-income-growth-inc-nysesafe/

Safety, Income and Growth has been portrayed as a relatively safe play - particularly as it trades below book value. However, there are real risks to the business model.

Currently, the company does not cover the dividend if all business expenses are considered as cash.

The business model makes zero on initial rent yields versus borrowing costs. There is little near-term economies of scale.

While contract escalators are tied to CPI, historically, LIBOR and CPI have had a different relationship. A return to historical norms would cause leases to be cash flow negative upon refinance.

https://seekingalpha.com/article/4208937-safety-income-growth-sober-look