Target Healthcare REIT

LN: THRL

Market Cap£671m

Last Close 108.2p

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

Acquisitions and index-linked rent uplifts continue to drive consistently positive returns. Operator rent cover and rent collection have remained robust although recently negatively affected by a small number of homes for which asset management plans are in place while tenant operator occupancy is rebuilding. Long-term, index-linked leases, an extension of long-term fixed-rate debt, and an historical ability of operators to match inflation pressures with fee growth offer good protection against increased inflation. Available investment capital of £67m remains, all allocated to board-approved acquisitions, which will contribute to full dividend cover on a fully deployed/developed basis.

Y/E Jun	Revenue (£m)	EBITDA (£m)	PBT (£m)	EPS (p)	P/E (x)	P/CF (x)
2020A	44.3	N/A	23.2	5.27	20.5	22.7
2021A	50.0	N/A	26.0	5.46	19.8	20.6
2022E	59.6	N/A	29.9	4.99	21.7	18.0
2023E	73.2	N/A	40.4	6.52	16.6	15.6

Industry outlook

The care home sector is driven by demographics rather than the economy. A growing elderly population and the need to improve the existing estate point to continuing demand for new, purpose-built homes with flexible layouts and high-quality residential facilities. With its unwavering focus on asset and tenant quality, these are the homes in which Target invests, believing that ‘best in class’ assets, in areas with strong demand/supply characteristics, and sustainable rent levels will always be attractive to existing or alternative tenants and are key to providing sustainable, long-duration income with capital growth.

Last updated on 04/07/2022