Demand for purpose-built care homes will continue to grow, as more people live well past retirement age. This is good news for Target Healthcare REIT (THRL), which owns 61 assets worth £464m, and where a combination of higher rental income and a valuation uplift pushed adjusted net asset value ahead by 1.1 per cent to 106.9p a share.
Seven new assets were acquired in the year to December 2018, comprising a mixture of operational homes and forward-funded developments. In addition, it is currently constructing eight new homes due for completion in 2019 that will generate £5.3m in annual rent. These will be leased to five new tenants, taking the number of tenants up to 26.
The company continues to be very selective on where it operates its homes, focusing on more affluent areas where there is less exposure to local authority funded placements. It also maintains a close engagement with existing tenants, and where standards are seen to be unsatisfactory new tenants are installed.
Despite investing £81.8m, net debt remains very low, with a loan-to-value rate of just 9.1 per cent. There is also very strong earnings visibility, with the average unexpired lease term one of the highest in the sector at 28.5 years.
| TARGET HEALTHCARE REIT (THRL) | ||||
| ORD PRICE: | 115.5p | MARKET VALUE: | £445m | |
| TOUCH: | 115-116p | 12-MONTH HIGH: | 119p | LOW: 102p |
| DIVIDEND YIELD: | 5.5% | DEVELOPMENT PROPERTIES: | nil | |
| PREMIUM TO NAV: | 8% | |||
| INVESTMENT PROPERTIES: | £438m | NET DEBT: | 10% | |
| Half-year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 106 | 14.4 | 5.7 | 3.225 |
| 2018 | 107 | 14.9 | 4.2 | 3.2895 |
| % change | +1 | +4 | -26 | +2 |
| Ex-div: | * | |||
| Payment: | * | |||
| Dividends paid quarterly. Second-quarterly dividend of 1.64475p a share paid on 22 Feb | ||||
