Assura's steady income will cost investors

Assura’s (AGR) organic rental growth is hardly spectacular but the income stream is reliable. The medical centre landlord posted a like-for-like net rental increase of 1.2 per cent during the first half and a rent collection rate that - unlike most other real estate owners - was undisturbed by the impact of the pandemic. 

The group has deployed £118m of the £189m raised in April and is on track to invest the remainder over the next six months. During the first half 20 properties were acquired, six development schemes were completed. That leaves 15 on site at a completion cost of £77m. 

Poor quality existing stock and an ageing population were already driving the need for new developments, said chief executive Jonathan Murphy, but the pandemic has created added urgency. “Hospitals are at capacity so more and more treatments are having to happen outside of hospitals,” he said. “That needs the location and the infrastructure.”

Investors have clambered for secure income within the UK real estate sector in the wake of the pandemic outbreak and that is reflected in the valuations of healthcare landlords, which have continued to increase dividends. Assura’s shares trade at a substantial premium to forecast NAV. The attraction of the income on offer looks well accounted for in the shares’ valuation. Hold. 

Panmure Gordon forecasts an adjusted NAV of 58p at the end of March 2021, rising to 59p in FY2022.

Last IC view: Hold, 78p, 21 May 2020