The continued demand for care home places once again boosted the value of Target Healthcare Reit’s (THRL) portfolio last year. After another active period of investment in the 12 months to June 2017, the value of the care home developer and landlord's assets jumped by a third to £282m. In fact, following the completion of two deals post year-end, the group has now used nearly all of the £84m it raised on listing in 2015. Crucially for income-seeking investors, rising profits pushed up the dividend cover to 77 per cent, and management believes full coverage will return this financial year.
Target's ability to successfully identify new properties was demonstrated by its acquisition or development of eight purpose-built care homes in the period, taking its total portfolio to 45 - split across 16 tenants. These new deals are also yielding returns. In the period, the portfolio beat its benchmark – the IPD UK annual healthcare property index – by delivering an annualised total return of 10.4 per cent.
Near-term profitability looks stronger, too. The annual rent roll rose a quarter to £20.2m, buttressed by an increase in the weighted average unexpired lease term to 29.5 years, up from 28.6 years in 2016. Should further opportunities present themselves, debt facilities have grown to £90m, although their full use would take the gearing ratio above the 20 per cent stated longer-term level.
Analysts at Stifel expect adjusted net assets of 108p a share at 30 June 2018, up from 102p a year before.
| TARGET HEALTHCARE REIT (THRL) | ||||
| ORD PRICE: | 117.8p | MARKET VALUE: | £297m | |
| TOUCH: | 117-118p | 12-MONTH HIGH: | 123p | LOW: 107p |
| DIVIDEND YIELD: | 5.3% | TRADING PROP: | Nil | |
| PREMIUM TO NAV: | 15% | |||
| INVESTMENT PROP: | £266m | NET CASH: | £10.4m | |
| Year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2015 | 97.9 | 9.59 | 8.02 | 6.12 |
| 2016 | 100 | 11.7 | 6.81 | 6.18 |
| 2017 | 102 | 19.3 | 7.58 | 6.28 |
| % change | +1.5 | +65 | +11 | +2 |
| Ex-div: | * | |||
| Payment: | * | |||
| *Dividends paid quarterly. The fourth-quarter dividend was paid on 25 August. | ||||
