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Primary Health Properties fundraising highlights strength of primary healthcare model, say analysts

The capital raise “indicates the strength of the investment case in more uncertain times”, Berenberg analysts said

Primary Health Properties PLC -

Primary Health Properties PLC’s (LON:PHP) upsized £140mln placing highlights the strength of its primary healthcare model versus other UK real estate sectors and demonstrates the “power and simplicity" of the company’s business model, analysts at Berenberg and Peel Hunt said in notes on Tuesday.  

The placing is designed to enable further investment in much-needed primary care facilities in both Ireland and the UK.

READ: Primary Health Properties announces successful completion of upsized placing

Berenberg upped its forecasts for full-year 2020 earnings per share by 2.3% to 5.4p and net asset value 2.6% to 109.1p due to the expanded £128m pipeline of opportunities and encouraging management commentary. 

The capital raise “indicates the strength of the investment case in more uncertain times”, the Berenberg analysts added, following some “admirable portfolio growth” in the first half of the year, including the completion of two developments in Ireland.

“Against the current economic backdrop, we think PHP's investment pipeline is achievable.”

The capital raise lowers the loan-to-value ratio from 45.8% to circa 41%, which is well below the recently revised upper limit of 50%.

Peel Hunt, PHP’s house broker, said: “Once again, the power and simplicity of the model is clearly demonstrated, with an of opportunities that will assist in driving further earnings accretion as well as a reduction in financial leverage.”

Despite the initial cash drag, Peel Hunt’s James Carswell said its EPS forecasts are unchanged with strong first-half EPS offsetting the initial dilution.

Carswell also upgraded its NAV forecasts by between 4-6% in each year following the strong first-half performance, to 111.2p for 2020 and 112.4p for next year.

“Our FY22 estimates imply a PE of c.23x and an attractive dividend yield of 4.2%,” the Peel Hunt analyst said, retaining his ‘add’ recommendation and target price of 175p.

Quick facts: Primary Health Properties PLC

Price: 139.2 GBX

Market: LSE
Market Cap: £1.83 billion

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