With a successfully completed £115m (gross) equity raise behind it, Primary Health Properties (LON:PHP) is well funded for continuing growth in its investment portfolio, targeting returns that are supportive the progressive dividend policy, now in its 22nd year. The prospects for cash deployment look positive, with a c £151m pipeline of investment prospects, of which more than a third are at a highly advanced stage of negotiation. Reduced gearing leaves Primary Health Properties (PHP) well placed to seize additional opportunities that may arise, with the NHS commissioning of primary healthcare investment finally showing signs of acceleration, and the Republic of Ireland (RoI) operation becoming established, with a fourth asset recently added.
Strong pipeline for deployment of funds
PHP has raised £115m (gross), issuing 106.5m new shares (a 17% increase) at 108p, a premium to the end-FY17 EPRA NAV per share of 100.7p. The proceeds will be used to selectively grow the investment portfolio. Of the £151m investment pipeline, £57m is agreed subject to contract. We have not changed our assumption of £100m a year of investment commitments in each of FY18 and FY19, but the size of the pipeline and reduced LTV offer the potential for more investment and higher earnings than we forecast. Our FY19 EPRA earnings forecast increases c 13% but EPS is c 2% lower. Our DPS forecasts are unchanged (FY19 cover 101%) while LTV falls to 45.0% from 51.9%.
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