US Edition Primary Health Properties
329p -6
Questor says BUY
The company, which owns modern GP surgeries and pharmacies around the UK on long leases, said that rent increases on leases reviewed in its third quarter were 3.23pc a year. Typically, rent reviews happen every three years and they have a relatively even distribution.
No new surgeries were added to the portfolio in the quarter, but the group arranged a new £25m 10-year facility, some of which it used to buy a new medical centre in Chesham, Buckinghamshire, for £5.6m, announced last week. The building will be let for occupation by two GP practices, the local primary care trust and a pharmacy. The building is expected to be completed in late 2011.
Last month, a flotation of peer Prime was pulled, which could imply that appetite for such investments in the City is muted. There are two other listed companies operating in the same space. Prime's failure to get its IPO away could benefit PHP as Prime will now focus on cutting debt, limiting its opportunities for new purchases.
There are also a number of differences between the two companies. PHP is not a developer, so does not take on such risk. The property portfolio is also fully owned and does not have any Local Improvement Finance Trust (LIFT) ventures. LIFT is a government-backed scheme to involve the private sector in financing primary and social care and community.
The shares were first recommended at 263p on December 18, 2008, as a relatively safe home for investors seeking income. The current-year earnings multiple is 19.2 times, falling to 18.2 next year. The high rating reflects the solid dividend and long-term revenue visibility.
The current year earnings multiple is 19.3 times, falling to 18.2 next year.
The shares are up 25pc since the recommendation, compared with a FTSE 100 up 34pc. The yield is 5.2pc and the company has raised its dividend every single year since it was listed 13 years ago. Buy.