ii view: Assura – a healthcare property income play?

Unlike shop and office owners, this healthcare property REIT proved largely unaffected by Covid-19.  

First-half trading update to 30 September

Chief executive Jonathan Murphy said:

"Over the last six months as a whole we have been focused on working closely with the NHS in its response to the pandemic and ensuring that primary care buildings of today and the future are more fit for purpose. 

"With the combined challenges of winter flu season and Covid-19 on the horizon, we are speaking to our occupiers about how we can best support the services in our communities, while listening to patients to understand how our spaces can help them feel confident in accessing these services. 

"It's clear that flexible, fit-for-purpose capacity for health services in our communities will be key in the NHS's efforts to address waiting lists and pent-up demand moving through and beyond this winter. Our strong strategic progress across all areas and resilient business model continues to position us well as the NHS's partner of choice in these uncertain times and beyond."

ii round-up:

Healthcare property specialist Assura (LSE:AGR) today reported rent collections in line with its normal patterns.   

Some rents from pharmacy and ancillary services are now being paid in monthly instalments along with some short-term deferrals, although agreed rental concessions total under £0.1 million.

Its full-year rent take is expected to be £113.3 million from its portfolio of 576 healthcare related properties, which includes the Headingley medical centre in Leeds and the Rothbury community hospital Morpeth.  

Assura shares were little changed in UK trading having remained almost unchanged year-to-date. Shares for rival healthcare real estate investment trust Primary Health Properties (LSE:PHP) are down around 5% in 2020. 

Shares for office and shop owners Land Securities (LSE:LAND)and British Land (LSE:BLND) are both down over 40% in 2020 with many buildings closed during the pandemic lockdown from late March. 

The Warrington headquartered Assura completed 20 acquisitions in the period for a combined £80 million, along with 26 asset disposals totalling £23 million. As at 30 September, gross debt stood at £1.07 billion with undrawn facilities of £300 million and cash of £310 million.

For the current financial year to date, it has declared first and second quarter dividend payments of 0.71p per share. 

Its property portfolio was valued at just over £2.1 billion as of late March this year. 

ii view:

Assura’s goal is to generate attractive financial and social returns for its shareholders and wider stakeholders by investing in, developing and managing high quality, sustainable medical centres that provide crucial infrastructure for their local health economy.

For investors, a price to net asset value of 1.4 times compared to a three-year average of 1.1 times suggests the shares are not obviously cheap. But in today’s Covid hit world, the dependable returns of medical care centres rents are unlikely to come cheap. An historic dividend yield of around 3.5% is also relatively attractive in an ultra-low interest rate era and comes with a track record of eight consecutive years of growth. In all, Assura may appeal to long-term income seekers who already hold a diversified portfolio of existing shares. 

Positives: 

• Record of dividend growth (not guaranteed)
• Development and acquisition pipeline of over £100 million

Negatives:

• Some rent deferrals agreed due to Covid-19
• Share price sits above 31 March 2020 net asset value of 53.9p per share

The average rating of stock market analysts:

Buy