NexLiving Communities: A Strategic Buyback Signals Undervaluation and Value Creation

In a move that underscores confidence in its long-term trajectory, NexLiving Communities Inc. (NXLV.V) has secured TSX Venture Exchange approval to renew its Normal Course Issuer Bid (NCIB), authorizing the repurchase of up to 1.5 million common shares—nearly 10% of its public float. This decision, timed amid strong financial performance and a compelling valuation narrative, positions shareholders for outsized gains as the company executes its growth playbook. Let's dissect why this NCIB renewal is a clarion call for investors to act now.

The Undervaluation Case: Price vs. Potential

NexLiving's current share price of $1.70 (as of May 26, 2025) sits just below the average buyback cost of its previous NCIB ($1.715/share), suggesting the market is underappreciating the company's growth catalysts. This discrepancy is puzzling given NexLiving's recent results: $14.3 million in 2024 net operating income (up 29% YoY) and $3.9 million in funds from operations (FFO, up 38%), paired with a 2,083-unit portfolio strategically located in secondary Canadian markets.

The company's focus on modern, affordable housing in regions with high demand—such as proximity to healthcare, transit, and amenities—is a secular winner. Secondary markets, often overlooked by institutional players, offer higher yield potential and lower competition. This niche positioning, combined with a robust acquisition pipeline, gives NexLiving a structural advantage to outperform peers.

Capital Allocation Efficiency: Buybacks vs. Dividends

While NexLiving maintains a quarterly dividend policy, the NCIB's renewal highlights a preference for share buybacks as a value-creation tool. With $1.5 million in buybacks authorized, management is signaling that its stock is undervalued and that repurchases will reduce dilution, boost EPS, and amplify returns for remaining shareholders.

Historically, buybacks have been accretive: under its prior NCIB (2024–2025), NexLiving repurchased 235,700 shares at an average cost of $1.715. Today's $1.70 price offers an even more compelling entry point. Crucially, the buybacks are funded from existing working capital, ensuring liquidity remains intact to pursue accretive acquisitions—a key driver of FFO growth.

Why the NCIB Renewal Is a Buying Opportunity

1. Undiscounted Growth Pipeline: NexLiving's focus on secondary markets—where rents are rising faster than in major cities—aligns with the affordable housing shortage in Canada. Its properties are in areas with population inflows and strong tenant demand, ensuring steady cash flows.
2. Financial Fortitude: With FFO up 38% YoY and a conservative balance sheet, the company has ample flexibility to execute both buybacks and acquisitions.
3. Shareholder-Friendly Strategy: The NCIB's 10% float buyback limit creates an immediate floor for the stock price, while dividend continuity ensures income seekers are rewarded.

The Bottom Line: Act Now Before the Market Catches On

NexLiving's renewed NCIB is more than a share repurchase program—it's a statement of confidence in its ability to capitalize on underpenetrated markets and execute its growth strategy. With shares trading at a discount to their intrinsic value and management actively deploying capital to enhance returns, this is a rare asymmetric opportunity.

Investors should add NexLiving to their watchlist and consider a position before the bid's June 2, 2025 start date. The combination of strong fundamentals, sector tailwinds, and strategic capital allocation makes this a multi-year winner. Don't let the market's current myopia hold you back—act swiftly before the undervaluation gap closes.

Disclaimer: This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.