Last close As at 05/08/2026
GBP1.12
▲ −1.40 (−1.23%)
Market capitalisation
GBP698m
Research: Real Estate
Target Healthcare REIT has released its Q424 trading update. We expect the full year results to be published in late September. Income and capital values are benefiting from inflation-linked rental growth, reflected in fully covered dividends and a sixth consecutive quarter of NAV growth and positive total returns. Q424 NAV total return was 2.8%, taking the FY24 total to more than 11%.
Target Healthcare REIT |
Q4 rounds off a strong year of performance |
7 August 2024 |
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Business description
Analyst
Target Healthcare REIT is a research client of Edison Investment Research Limited |
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Target Healthcare REIT has released its Q424 trading update. We expect the full year results to be published in late September. Income and capital values are benefiting from inflation-linked rental growth, reflected in fully covered dividends and a sixth consecutive quarter of NAV growth and positive total returns. Q424 NAV total return was 2.8%, taking the FY24 total to more than 11%.
Q424 trading update |
Year end |
Rental |
Adjusted earnings* (£m) |
Adjusted |
NAV**/ |
DPS |
P/NAV |
Yield |
06/23 |
67.7 |
37.2 |
6.0 |
104.5 |
6.18 |
0.75 |
7.9 |
06/24e |
69.1 |
37.8 |
6.1 |
109.4 |
5.71 |
0.71 |
7.3 |
06/25e |
73.3 |
38.7 |
6.2 |
113.7 |
5.84 |
0.69 |
7.5 |
06/26e |
75.7 |
39.0 |
6.3 |
118.0 |
5.96 |
0.66 |
7.6 |
Note: *Adjusted earnings exclude revaluation movements, non-cash income arising from the accounting treatment of lease incentives and guaranteed rent review uplifts and acquisition costs and include development interest under forward fund agreements. **NAV is net tangible assets (NTA) throughout this report.
In the three months to 30 June (Q424), EPRA net tangible assets per share increased by 1.6% to 110.7p, adjusted EPS of 1.51p and fully covered DPS of 1.428p. The unaudited quarterly data indicate full-year adjusted EPS of 6.1p, 1.07x aggregate DPS of 5.712p (up 2% versus FY23). Tenants continue to perform well and rent collection remains robust at 99%. Rent cover on mature homes was stable, at 1.9x for the March 2024 quarter (most recent quarter of tenant data).
The EPRA topped-up net initial yield has been stable throughout the year, at 6.2%, allowing annually indexed rental growth (c 4% during the year) to be reflected in property revaluation gains and NAV growth as well as income. Higher rental income has offset the impact of high average interest costs during the year. Interest costs on most borrowings are fixed or hedged, although some unhedged floating rate debt was drawn during the year to fund construction of the development assets, of which £13m remains to be advanced. The late June sale of four care homes for £45m has allowed for much of this to repaid and end-Q424 borrowing of £243m was 95% fixed/hedged at an average all-in cost of 3.9% until at least November 2025. The end-Q424 LTV was a low 22.5% with total available capital of £85m net of investment commitments. This includes £77m of undrawn debt facilities which, if drawn, would currently carry a cost of c 7.2%, a continuing obstacle to accretive acquisitions.
Notwithstanding the headwind to acquisition-led growth, indexed uplifts and development completions will drive FY25 income growth. Rents are reviewed annually and are mostly RPI linked, capped and collared at between 2% and 4%. Despite moderation RPI to around 3% currently, reviews will have a positive impact, while the three development completions in H224 (one in Q424), with annualised rents of £2.6m pa, will make a full contribution. Two remaining projects will add £1.4m pa at completion in the coming months. The asset sale is modestly accretive to immediate earnings. We will review our forecast with the full-year results, but adjusted earnings are in line with our expectations and EPRA NTA per share is ahead of our 109.4p forecast.
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Research: TMT
Altron’s AGM trading update confirmed that the positive momentum seen in H224 has continued so far in H125. The company also announced that it had decided to stop the sale process for Altron Document Solutions (ADS) and bring the business back into continuing operations within the IT Services segment. We maintain our forecasts pending further clarity on ADS financials, noting that the business returned to profitability in H224 and is self-funding.