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1. Company Snapshot

1.a. Company Description

Primary Health Properties (PHP) is the leading investor in modern healthcare properties in the UK & Ireland.PHP is a UK based Real Estate Investment Trust (REIT) with a clear objective to create progressive returns to shareholders through a combination of earnings growth and capital appreciation.PHP achieve this by investing in healthcare real estate let on long-term leases, backed by a secure underlying covenant funded mostly by government bodies.


The Group's portfolio comprises over 480 primary healthcare facilities, both completed and committed, the majority of which are GP surgeries, with other properties let to NHS organisations, pharmacies and dentists.

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1.b. Last Insights on PHP

Primary Health Properties PLC's recent performance was driven by robust earnings, a significant acquisition in Ireland, and a commitment to dividend growth. The company's FY 2024 earnings call highlighted its strong financial position, which is expected to support future growth. The acquisition in Ireland expands the company's portfolio and increases its presence in the region. Additionally, the commitment to dividend growth is a positive signal to investors, indicating a strong cash flow generation and confidence in its future prospects.

1.c. Company Highlights

2. PHP Group plc: FY '24 Earnings Review

PHP Group plc delivered a solid financial performance in FY '24, with net rental income increasing by 3% to GBP 153.6 million. This growth was driven by successful rent reviews, asset management initiatives, and the acquisition of the Ballincollig facility. The company's ability to capitalize on its existing portfolio and expand its footprint through strategic acquisitions underscored its operational resilience. Adjusted earnings for the year stood at GBP 93 million, reflecting strong underlying performance despite elevated interest and administrative expenses. The company also announced a 3% increase in its dividend to 6.9p per share, aligning with its commitment to returning value to shareholders. PHP's financial results were bolstered by its 90% government-backed income, providing a stable revenue stream and reinforcing its position as a key player in the UK's healthcare infrastructure sector.

Publication Date: Mar -09

📋 Highlights
  • Strong Financial Performance and Growth:: PHP reported a 3% increase in net rental income to GBP 153.6 million, driven by rent reviews, asset management, and acquisitions, including the Ballincollig facility and Laya Health.
  • Strategic Position in Primary Care:: The company emphasized its strategic focus on the growing primary care sector, supported by the UK government's 10-year plan, with 90% of income backed by government contracts.
  • Expansion and Development in Ireland:: PHP's acquisition of Laya Health and its focus on Ireland's improving healthcare market, driven by an aging population and favorable government policies, highlight growth opportunities.
  • Focus on ESG and Social Impact:: The company highlighted its commitment to ESG principles and social impact, further enhancing its appeal to investors seeking sustainable investments.
  • Financial Stability and Dividend Growth:: With a net asset value (NAV) of 105p and a low loan-to-value (LTV) ratio of 48.1%, PHP maintained financial stability and increased its dividend by 3% to 6.9p, supported by adjusted earnings of GBP 93 million.

Valuation Metrics and Market Position

PHP's valuation metrics highlight its appeal as an income-focused investment. With a dividend yield of 7.68%, the company offers attractive returns for income-seeking investors. Additionally, the price-to-book ratio of 0.87 reflects the market's confidence in the company's ability to generate consistent cash flows and execute its growth strategy. The enterprise value-to-EBITDA ratio of 20.36 indicates a reasonable valuation multiple, suggesting that the market has priced in PHP's growth prospects while maintaining a focus on stability. These metrics, combined with the company's strong balance sheet and strategic initiatives, position PHP as a compelling investment in the healthcare real estate sector.

Strategic Initiatives and Growth Drivers

PHP's strategic focus on expanding its healthcare portfolio in the UK and Ireland remains a key driver of growth. The acquisition of Laya Health and Wellbeing Clinic in Cork, Ireland, for EUR 22 million, demonstrates the company's ability to identify and capitalize on opportunities in a growing healthcare market. In Ireland, the aging population and government healthcare reforms, particularly under the Slaintecare plan, are expected to drive demand for specialized healthcare facilities. PHP's success in Ireland is further evidenced by its low vacancy rate of 0.8% and a strong pipeline of development projects, including a 7,000 sqm facility in Cork. These initiatives are expected to contribute meaningfully to future rental income growth.

Market Outlook and Risks

Looking ahead, PHP is well-positioned to benefit from the UK government's 10-year primary care plan, which aims to increase the number of GP surgeries and healthcare facilities. The company's ability to deliver high-quality, purpose-built assets with long lease terms (average of 9.4 years) provides a stable income stream and reduces occupancy risks. However, the company faces challenges in managing rising costs and maintaining rental growth in a competitive market. The successful implementation of its cost-saving initiatives, including a GBP 1 million redundancy program, will be critical to maintaining margins and supporting future dividend growth.

Conclusion

PHP Group plc's FY '24 results demonstrate its ability to execute a disciplined growth strategy while maintaining financial discipline. With a strong pipeline of development projects, attractive valuation metrics, and a focus on high-quality healthcare assets, the company is well-positioned to capitalize on the growing demand for healthcare infrastructure in the UK and Ireland. While risks such as rising interest rates and operational costs remain, PHP's strategic initiatives and long-term vision provide a solid foundation for sustained growth and value creation for shareholders.

3. NewsRoom

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Why The Narrative Around Primary Health Properties Is Shifting After The Assura Acquisition

Nov -29

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What Analysts Think Powers Primary Health Properties’ New Growth Story

Nov -13

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Form 8.3 - NCC Group plc

Aug -14

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Form 8.3 - Dowlais Group plc

Aug -13

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Form 8.3 - NCC Group plc

Aug -12

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TMR Capital (PTC) Limited’s View on the Assura plc Acquisition Offers

Aug -11

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Form 8.3 - Tritax Big Box REIT Plc

Aug -11

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Form 8.3 - Dowlais Group PLC

Aug -08

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Investment Property

Expected Growth: 4.5%

Growing demand for healthcare services, aging population, and government initiatives to improve healthcare infrastructure drive the growth of Primary Health Properties PLC's investment property portfolio, generating stable rental income.

7. Detailed Products

Medical Centers

Primary Health Properties PLC develops and invests in medical centers, providing high-quality healthcare facilities for healthcare professionals and patients.

Surgery Centers

The company invests in and develops surgery centers, offering state-of-the-art facilities for surgical procedures.

Dental Clinics

Primary Health Properties PLC develops and invests in dental clinics, providing modern facilities for dental care professionals.

Pharmacies

The company invests in and develops pharmacies, offering convenient locations for patients to fill prescriptions and access healthcare services.

Health and Wellness Centers

Primary Health Properties PLC develops and invests in health and wellness centers, offering facilities for fitness, rehabilitation, and wellness services.

8. Primary Health Properties PLC's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Primary Health Properties PLC is moderate due to the presence of alternative healthcare providers and medical facilities.

Bargaining Power Of Customers

The bargaining power of customers is low for Primary Health Properties PLC as patients have limited negotiating power in the healthcare industry.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate for Primary Health Properties PLC as the company relies on various suppliers for medical equipment and services.

Threat Of New Entrants

The threat of new entrants is low for Primary Health Properties PLC due to the high barriers to entry in the healthcare industry, including regulatory hurdles and capital requirements.

Intensity Of Rivalry

The intensity of rivalry is high for Primary Health Properties PLC due to the presence of several established healthcare providers and medical facilities in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 48.17%
Debt Cost 3.95%
Equity Weight 51.83%
Equity Cost 5.66%
WACC 4.83%
Leverage 92.93%

11. Quality Control: Primary Health Properties PLC passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Target Healthcare REIT

A-Score: 7.1/10

Value: 5.3

Growth: 5.8

Quality: 7.7

Yield: 8.8

Momentum: 6.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Assura

A-Score: 6.8/10

Value: 4.8

Growth: 4.0

Quality: 6.7

Yield: 9.4

Momentum: 7.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
PHP

A-Score: 6.2/10

Value: 4.5

Growth: 4.3

Quality: 5.8

Yield: 9.4

Momentum: 3.5

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Care Property Invest

A-Score: 5.9/10

Value: 5.4

Growth: 5.4

Quality: 5.8

Yield: 9.4

Momentum: 1.5

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Mercialys

A-Score: 5.7/10

Value: 3.8

Growth: 3.1

Quality: 4.9

Yield: 10.0

Momentum: 3.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Impact Healthcare REIT

A-Score: 5.2/10

Value: 4.8

Growth: 3.8

Quality: 7.3

Yield: 8.1

Momentum: 4.0

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

0.97$

Current Price

0.97$

Potential

-0.00%

Expected Cash-Flows