Property valuations may have come under pressure in the wake of the referendum, but the UK's position in or out of the EU doesn't affect the fact that the number of older people needing care is on the rise. So is the portfolio value of care homes operator Target Healthcare Reit (THRL).
Of the £84m raised in May last year, £77m has been invested, with five additional care homes acquired or redeveloped in the first half, taking the total to 41 modern purpose-built care homes managed by 15 tenants, with another tenant starting in April. And the remaining capital is expected to be allocated by spring this year. This is important because the dividend is currently not covered by adjusted earnings; previously it has been, when the group has been fully invested.
At the half-year, the annual rent roll had risen from £15.5m in June last year to £18.2m, largely as a result of acquisitions, and crucially the weighted average unexpired lease term remained the longest in the sector at 29.4 years. Given the funding pressures on care homes, the company has maintained strict acquisition criteria and continues to identify opportunities where higher numbers of private pay residents can help to offset pressures on rates paid by state-funded residents.
Analysts at Stifel are forecasting adjusted net asset value of 104p at the December year-end (from 100p in 2016).
| TARGET HEALTHCARE REIT (THRL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 113.5p | MARKET VALUE: | £286m | |
| TOUCH: | 111-113.5p | 12-MONTH HIGH: | 115p | LOW: 106p |
| DIVIDEND YIELD: | 5.5% | DEVELOPMENT PROPERTIES: | nil | |
| PREMIUM TO NAV: | 11% | NET CASH: | £6.4m | |
| INVESTMENT PROPERTIES: | £240m | |||
| Half-year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p*) |
|---|---|---|---|---|
| 2015 | 101 | 8.4 | 5.7 | 3.09 |
| 2016 | 102 | 11.6 | 4.4 | 3.14 |
| % change | +1 | +38 | -22 | +2 |
Ex-div: - Payment: - *Dividends paid quarterly 2nd interim of 1.57p per share paid on 24 February | ||||
