Primary Health Properties: Continuing To Find Acquisition Opportunities
Edison | Dec 18, 2017 06:53AM ET
Primary Health Care Ltd (AX:PRY) has agreed the acquisition of a large and modern primary care facility in the Republic of Ireland (RoI), its third to date, at a cost of €20m. Yields in the RoI remain noticeably ahead of those currently available in the UK despite some signs of competition. Acquisitions of c £70m since end-H1, and a current contracted rent roll of just over £73m, are in line with our forecasts for the year and sufficient to trigger investment adviser performance fees, now included in reported, but not underlying, earnings forecasts. Acquisitions, rent increases, and long and largely government-backed leases underpin PHP’s attractive, growing and fully covered dividend, which we expect to continue its 20-year growth trend.
Strong investor interest continuing
PHP has continued to source asset growth in H217 despite continuing strong investor interest in the secure, long-term income streams available on primary healthcare property and tightening yields. 90% of PHP’s UK rents and 75% in Ireland are government-backed, and the comparison with 10-year gilt yields of c 1.3% is stark. The net initial yield reflected in PHP’s portfolio contracted from 5.17% to 5.04% in the first half of the year and, while we do not forecast further tightening (our forecast valuation gains are driven off rent growth), more recent updates from peers suggest this is possible. While good for reported NAV, yield tightening reflects an increased cost of acquiring assets for growth.
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Primary Health Properties Continuing To Find Acquisition Opportunit
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