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Impact Healthcare defensively positioned

The care home landlord has also boosted its debt facilities
April 8, 2020

In the face of the Covid-19 outbreak, Impact Healthcare (IHR) has proved more resilient than the broader real estate investment trust (Reit) sector. The care home landlord collected 100 per cent of rent due for the second quarter and prior to the pandemic had a conservative loan-to-value ratio of just 6.8 per cent. Management is receiving weekly updates from tenants on occupancy levels, as well as how many cases of the virus have been recorded in different care homes, said managing director Andrew Cowley.

IC TIP: Buy at 93p

Three new tenants were added last year, with a further two likely to follow in 2020 as the group attempts to diversify its tenant base. However, the financial health of care operators is also a prime focus for the group, said Mr Cowley, pointing to an average rental cover multiple of 1.8 across its tenant base.

“It’s very easy to buy care homes,” he said. “The key question is who is going to run these care homes for you and are they going to do a good job?”. Determining that can involve up to two years of discussions with an operator, he added. 

Almost £74m in acquisitions last year, plus a £13.9m valuation uplift, boosted the overall value of the portfolio by 42 per cent. However, the group has “hit the pause button” on discussions around adding to the portfolio in light of Covid-19.

IMPACT HEALTHCARE REIT (IHR)   
ORD PRICE:93pMARKET VALUE:£297m
TOUCH:93-95p12-MONTH HIGH:115pLOW: 59p
DIVIDEND YIELD:7.2%TRADING PROP:nil
DISCOUNT TO NAV:13.1%  
INVESTMENT PROP:£311mNET CASH:£24m
Year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)**
2017*1019.55.84.5
201810316.58.66.0
201910726.310.46.7
% change+4+59+21+12
Ex-div: na   
Payment: na   
*10 months to 29 Dec **Dividends paid quarterly, fourth-quarter dividend of 1.5425p paid on 21 Feb