H118 results from Medicx Fund Ltd (LON:MXF) saw continued portfolio and rental growth, with costs well controlled. The positive results were accompanied by a new dividend policy, which will rebalance total returns partly away from dividends paid and more towards capital growth. From FY19 it targets a lower, fully covered DPS, conserving cash flow and providing greater flexibility to sustainably fund further accretive asset growth. The FY19 prospective dividend yield of c 5% remains attractive and the shares are priced at a c 10% P/NAV discount to peers.
Continued progress
The dividend rebalancing has no impact on NAV total return and is a sensible adjustment reflecting sustained tightening in property yields, better positioning the fund for further accretive asset growth. MedicX has near-term acquisition opportunities of £174m, including a £64m portfolio of income-producing properties on which it hopes to complete by 8 June. It is considering the issue of 42.88m new shares at close to NAV as part consideration, conserving existing debt headroom. Anticipating faster portfolio growth through H218 and FY19, our forecasts for rental income and EPRA earnings are increased, although share issuance slightly reduces FY19 EPS. FY18 EPRA NAV per share benefits from valuation gains in H118, and reduced dividend distribution in FY19. The implied NAV total return lifts to 11.9% in FY18 (from 8.4%) and slightly reduces to 8.5% in FY19 (9.3%).
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