Continuing yield compression generated additional valuation gains in Q3, while selective acquisitions continue at Medicx Fund Ltd (LON:MXF). The EU referendum result has no impact on the fundamental drivers of primary care and we doubt that the political will to deliver healthcare reforms will be dented. As a long-term investor in a broad portfolio of modern primary care properties, MedicX Fund has very secure, long-term cash flows to support the c 6.7% progressive dividend yield, while portfolio growth is increasing dividend cover. Lease duration is long and quasi-government backed, while debt is of similar duration with the cost fixed (gearing of 52.3% at 31 March 2016).
Portfolio growth and valuation gain in Q316
A further contraction in UK valuation yields during the quarter (to 5.28% at 30 June from 5.36% at the end of March) contributed to a net valuation gain of £7.4m. The unaudited EPRA NAV was £275.1m at the end of the period, or 72.8p per share, up from 71.2p at 31 March and after 1.4875p of dividends. The investment pipeline is strong and selective investment continues, but at a slower pace in the quarter than we had allowed for, leading us to defer some expected investment to FY17. We have slightly increased our NAV estimate as a result of valuation gains and slightly delayed revenue growth as a result of the investment deferral (see Exhibit 1).
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