Target Healthcare REIT

LN: THRL

£431.3m market cap

112p last close

Target Healthcare REIT invests in modern, purpose-built residential care homes in the UK let on long leases to high quality care providers. It selects assets according to local demographics and intends to pay increasing dividends underpinned by structural growth in demand for care.

Investment summary

Target’s portfolio of high-quality purpose-built care homes continued to grow and perform well in the three months ended 30 June (Q419) with RPI-driven rental growth, increased property valuations, continuing acquisitions of operational homes and progress with pre-let forward-funded developments. EPRA NAV per share was 107.8p at 30 June 2019 (Q419), an increase of c 0.5% in the quarter and 2.0% in the year. Including dividends paid, the quarterly EPRA NAV total return was 2.1% or 8.2% for the year. Aggregate quarterly DPS for the year increased 2% to 6.58p. Acquisition activity in Q419 was slower than we assumed but £18.6m has since been committed to two high quality operational homes with full en-suite wet room facilities. The pipeline remains strong with debt funding available, while the share placing programme approved by the EGM along with the new corporate structure provides additional funding flexibility. We continue to forecast DPS growth in FY20, fully covered by earnings.

Y/E Jun
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 23.6 N/A 12.2 5.23 22.2 90.4
2018A 28.4 N/A 14.8 5.54 20.9 14.8
2019E 33.2 N/A 18.0 5.37 21.6 41.4
2020E 43.0 N/A 25.9 6.78 17.1 18.3
Last updated on 05/08/2019
Industry outlook

The UK population over the age of 85 is expected to increase by 140% from 2014 to 2039 which, combined with a current shortage of high-quality care homes, suggests a strong investment demand in years to come.

Last updated on 05/08/2019
Share price graph
Balance sheet
Forecast net debt (£m) 81.1
Forecast gearing ratio (%) 20
Price performance
%
1m
3m
12m
Actual (2.3) (3.6) (0.4)
Relative* 2.1 (1.1) 6.2
52-week high/low 118.2p/106.0p
*% relative to local index
Key management
Kenneth MacKenzie CEO
Gordon Bland FD

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