European care-home owner Public Service Properties Investments
Reported results for 2010 were also heavily skewed by lots of non-cash charges, particularly £17.4m of write-downs of accrued income relating to theoretical rent guarantees that the company removed for tax purposes. On an adjusted basis, pre-tax profits actually rose 25 per cent to £8m thanks to inflation-indexed lease agreements.
With tightening local-authority budgets, UK care-home operators face a tough period. A further risk for PSPI is client concentration - it only has one tenant in the UK, the privately-owned European Care Group (EC). But finance chief Ralph Beney stresses that PSPI has a strong, decade-old relationship with EC, which should be better protected from public-sector cuts than its peers because it makes 30 per cent of its income from special-needs care.
Brokerage Arbuthnot expects year-end adjusted net asset value (NAV) to rise to 178p (2010: 153p).
|PUBLIC SERVICE PROPERTIES INVESTMENTS (PSPI)|
|ORD PRICE:||77p||MARKET VALUE:||£78m|
|TOUCH:||76-77p||12-MONTH HIGH:||81p||LOW: 66p|
|DIVIDEND YIELD:||9.2%||TRADING STOCK:||nil|
|DISCOUNT TO NAV:||36%|
|INVEST PROPERTIES:||£272m||NET DEBT:||107%|
|Year to 31 Dec||Net asset value (p)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 4 May
Payment: 27 May
PSPI’s shares are trading 57 per cent below adjusted NAV estimates and yield over 9 per cent. That looks unwarranted for a property company with rock-solid rental growth prospects and a generous dividend policy. Buy.
Last IC view: Good value, 74p, 20 September 2010