In H116 Medicx Fund Ltd (LON:MXF) continued to selectively add assets, despite a highly competitive UK investment market, and it maintains a strong investment pipeline in both the UK and Republic of Ireland. Profit progression during the period was limited by the time between drawing on funding and income generation from investment; as this unwinds, earnings growth should pick up, supported by the new management fee structure. As a long-term investor in modern primary care properties in the UK and the Republic of Ireland, the fund should benefit from growing demand to meet healthcare needs. Leases are long, substantially government backed, and funded by fixed rate debt (c 52% LTV) of similar duration, underpinning secure cash flows to support the 6.8% prospective yield.
Earnings and dividend growth with cover following
EPRA earnings were lower than H115 but ahead of H215, and we expect progress as recent investments contribute more fully, with management fees fixed by the new arrangement. With a pipeline of £144m, we continue to look for £60m of new investment this year and £75m in FY17. Our EPRA NAV forecast is slightly increased due to H116 gains from yield compression; further gains are possible but not assumed in our forecasts. Our EPRA earnings forecasts are slightly reduced (higher non-management fee expenses and increased shares in issue from treasury sales), delaying dividend cover improvement (to 66.8%) until FY17.
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