Target Healthcare REIT

LN: THRL

Market Cap£719.5m

Last Close 116p

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

The FY21 results and Q122 trading update show a continuation of Target’s consistent record of positive accounting returns, substantially delivered by growing dividends. Q122 NAV per share increased to 111.3p and including DPS paid the quarterly total return was 1.7%, following an annual 8.8% in FY21. The £125m (gross) proceeds from September’s equity issue will be directed at a strong c £230m pipeline of further acquisition opportunities, much in exclusivity and expected to complete imminently. Reported COVID-19 cases across the portfolio remain very low and occupancy for tenant operators across mature homes has been rebuilding since the Q121 lows. Asset management progress on the small number of underperforming homes will also support FY22 performance.

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	22.0	23.8
2021A	50.0	N/A	26.0	5.46	21.2	22.1
2022E	58.4	N/A	33.4	5.63	20.6	17.0
2023E	71.9	N/A	41.0	6.66	17.4	17.1

Industry outlook

Care home demand is driven by demographics and care needs with a shortage of quality care homes suggesting strong investment demand in years to come. The operating sector has begun to recover from the impacts of the pandemic with home occupancy beginning to rebuild as admissions pick-up. Proposed government reforms of health and social care are positive for the sector, providing additional state funding and a more certain long-term planning environment for providers.

Last updated on 18/01/2022