# Primary Health Properties Strong set of results, confirming ongoing rent rises

- Link: https://www.directorstalkinterviews.com/primary-health-properties-strong-set-of-results-confirming-ongoing-rent-rises/412850572
- Published: 2020-08-12T08:09:14+01:00
- Author: Amilia Stone

**Primary Health Properties plc **(LON:PHP) 29 July interims showed a 7.1% EPRA 
EPS increase, rising NAV and a continued rise in DPS. Illustrating the growth, rents
rose 20.4%, and adjusted EPRA earnings rose 29.0%. On 9 July, PHP launched a £120m
proposed placing, at a point in the REIT’s development that is underpinned by a 
strong and broad pipeline. The placing was expanded to £140m as a result of investor
appetite. The short-term pipeline stands at £128m, and there is also growth from
active management of existing assets. We consider this REIT has significant per 
share value growth potential, through capital deployment, rent rises and financing
cost efficiencies.

 * **A stand-out performer:** Adjusted EPRA earnings rose 29%, or £8.1m. with £4.1m
   deriving from a full six months of the MedicX merger benefits, £2.2m from rental
   growth and reviews, and £1.8m from the reduced interest rate vs. the prior year.
   COVID-19 financial resilience illustrated PHP’s index-linked, gilt-style character.
 * **Investment summary:** 25% of leases being index-linked and 6% on fixed uplifts
   enhance even further the attractions of the AAA covenant, we believe. Also, the
   deployment success of the September 2019 equity raise is highly likely to be 
   replicated on the latest oversubscribed raise, enhancing long-term dividends.
 * **Expansion:** PHP deploys into new development funding, but also secures opportunities
   to buy standing assets. This is a growing sector. Last September, Primary Health
   Properties raised growth equity at 128p; all of this has been deployed. With 
   assets yielding 4.9% and new debt costing ca.2% or less, expansion is accretive.
 * **Valuation:** The rating reacted positively to 2019 strategy execution, including
   the MedicX merger and the reduction in debt costs. The progressive dividends 
   are – and will remain, we estimate – fully covered by earnings. This is not the
   first time investor appetite has exceeded initial targets for equity issuance.
 * **Risks:** The recent placing helps to maintain an appropriate loan to value (
   LTV) in the short term, reducing the 30 June 2020 ratio by around 5.0ppts, from
   45.8% to 40.3% on a pro-forma basis. Interest cover is over 2.9x. No direct development
   risk is taken, and the long leases are upwards-only rents.

[DOWNLOAD THE FULL REPORT](https://www.hardmanandco.com/wp-content/uploads/2020/08/Primary-Health-Properties-12-August-2020.pdf)

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