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 year ended 30 June (FY19) 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 107.5p (FY18: 105.7p) and the EPRA NAV total return was 8.1%, in line with the 7.9% annualised return since IPO. DPS increased 2% to 6.58p (FY18: 6.45p) and the company proposes a further 1.5% increase to 6.68p in FY20. Since shareholders approved a share placing programme in August, Target has acquired three properties for a total value of £26.2m and sold two homes at a small premium to valuation. With a near-term acquisition pipeline of c £92m, exceeding current uncommitted capital of c £35m, and an extensive pipeline of longer-term opportunities, in September the company raised £80m in an oversubscribed issue of new shares under the placing programme priced at 110.5p/ share (yet to be reflected in our forecasts).

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
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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