US Edition Primary Health Properties
263p -10
Questor says BUY
Questor believes that Primary Health Properties has one of the safest dividends around – that's why the shares were recommended on December 18 at 263p. They were also named as one of Questor's tips of the year in January at 299p as a safe dividend play. Ahead of the company's interim figures next Tuesday, this remains the case and the shares remain a buy.
PHP is one of the largest providers of primary healthcare properties in the UK. It builds and owns GP surgeries, pharmacies and other medical facilities across the country.
There are many concerns about future government spending as the economy has decimated public finances, but healthcare is unlikely to see funding cuts. The company's model is also relatively low risk, as it does not build surgeries on spec. Just like Questor's bullish stance on food and the food supply chain, healthcare is another long-term global bull market supported by demographics.
Last month, the US Census Bureau released a study which showed that, within 10 years, there will be more people in the world over the age of 65 than under the age of five. This has never happened before.
In the next 30 years, the number of people in the world over the age of 65 is expected to double. This means healthcare provision is as near to a perpetual bull market as there could possibly be.
In the UK, this trend is very pronounced. According to data compiled by the Office for National Statistics, it is not just increasing life expectancy that is contributing to the UK's ageing population.
The baby boomer generation of just after the Second World War are moving into older age bands, but there are fewer people down the age ranges to replace them. This was because of low fertility rates in the mid-to-late 1970s and in the late 1980s and 1990s.
PHP is therefore operating in a fundamentally strong market, which should provide it with plenty of opportunities to grow over the longer term.
However, the reason Questor advises buying the shares is not for any near-term capital appreciation, it is for the dividend.
The shares are currently yielding an impressive 6.2pc. The payout is secure because the company's revenues are locked in for years.
In fact, its average lease length is about 20 years. A total of 91pc of its revenues are derived from government-linked agencies, primarily the NHS. The majority of the rest of its revenues comes from rentals to pharmacies, which are an essential part of the healthcare chain.
At its trading update in April, the company confirmed that it was maintaining its progressive dividend policy, with analysts pencilling in a 17p payout for 2009, rising to 17½p in 2010.
The last trading update was upbeat and the company said rental incomes continued to grow, and tenant demand for modern healthcare facilities remained high.
The group also said in April that rent rises in the first quarter of this year were at an equivalent level to the prior year. The market in which PHP operates is very tightly supplied. The company reviews its rental agreements every three years – and they are "upward only".
The group does not have significant debt to refinance until 2013. The company raised £3.3m in March at 220p a share, so it looks fully funded for its current plans.
The shares, which are trading on a December 2009 earnings multiple of 14.8 times, remain a buy for the dividend.
Standard Chartered
£14.14 +38p
Questor says BUY
It is not often a £1bn fund-raising is good news for a company – but for Standard Chartered it is. The company placed shares with institutional investors to take advantage of new business opportunities. A few days later the group revealed that it was to embark on a hiring spree to allow it to compete with HSBC and Citigroup to win wealthy retail customers across Asia.
Standard said it would hire 850 bankers over the next 18 months, the majority in China. However, new positions will also be created in other Asian countries such as Singapore and Malaysia.
The transfer of economic power from West to East is an unstoppable trend – and Standard Chartered, with its focus on Asia, the Middle East and Africa, is well placed to benefit from this change in economic fortunes.
Standard is the only bank that Questor has recommended recently and, although there have been some stunning double-digit gains in UK banks, Questor remains comfortable with this view.
Unemployment is still rising and bad debts are likely to accelerate. Whatever the news on GDP coming out of France and Germany, the West is far from being out of the economic woods.
Standard escaped the worst of the financial collapse because it had focused on more traditional banking in markets where savings is still regarded as important. Indeed, because of the lack of a welfare state net in these countries, saving is essential.
The shares are currently trading on a December 2009 earnings multiple of 13.8 times and yielding 2.8pc.
Questor recommends an investment in Standard Chartered as a medium-term method to play the development of these fledgling economies. The shares, which are up 14pc since they were tipped, are still a buy.