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 continues to grow and perform well. EPRA NAV total return in the three months ended 30 September 2019 (Q120) was 2.0% including DPS paid and a 0.4% increase in EPRA NAV to 107.9p. Quarterly DPS has increased 1.5% to 1.67p per share. Property income and valuations continue to benefit from RPI-driven rental growth with property yields stable in the period. The quarter saw three new operating homes and two new tenants added through acquisition and the group’s development funding programme and two homes were disposed of, taking the number to 61 let to 26 tenants. After the period end, Target agreed the acquisition of eight new care homes and 31 retirement apartments for £81.3m (including costs), swiftly deploying the £80m gross proceeds from September’s oversubscribed issue of new shares at a price of 110.5p. Further opportunities to deploy remaining debt capital resources are being assessed.

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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