What PHP does

Primary Health Properties PLC (LON:PHP) invests solely in the freehold or long leasehold of modern purpose-built healthcare facilities in the UK and the Republic of Ireland.

The group holds the properties for long-term investment and leases them to general practitioners (GPs), government healthcare bodies, pharmacies and other associated healthcare agencies.

The company floated on AIM in 1996 before graduating to the full market in 1996, and in 2018 it reached a significant milestone, joining the FTSE 250 index.

In November 2019, PHP increased the size of its portfolio to 485 properties worth £2.4bn after securing a £4.92mln funding deal for the construction of a new primary care centre at Mountain Ash in Wales, bringing its total rent roll to around £127mln.


How it is doing

While a merger with MedicX fund last year gave a big boost to the company’s portfolio, PHP has continued to acquire medical centres on a regular basis, expanding in both the United Kingdom and Ireland.

For the 12 months ended 31 December, the FTSE 250-listed healthcare property group said net rental incomes had risen by 51.4% to £115.7mln, while adjusted EPRA earnings were 62.2% higher at £59.7mln, £15.6mln of which had been contributed by MedicX.

The total dividend for the year was also 3.7% higher at 5.6p per share.


What the boss says: Harry Hyman, managing director

“We have a strong pipeline of opportunities in the UK and Ireland and are well-positioned to continue to grow our portfolio and to support the healthcare systems in these markets through the provision of modern, primary care infrastructure.”




What the broker says: Liberum 

Healthcare property stocks will continue to benefit from supportive structural growth trends, says Liberum, and Primary Health Properties is preferred to sector rival Assura by the broker.

PHP has a greater future total returns profile with relatively more room for yield compression and scope to improve cost of debt post its merger with MedicX Fund.

Merger synergies have already delivered a £4mln pa reduction in the enlarged group’s operating cost base, further enhancing earnings growth.

PHP’s average floor area is also larger than Assura and its larger fit-for-purpose buildings allow greater patient, organisational and cost benefits to the healthcare system, reducing strain on the NHS.

The shares currently trade at a 41% premium to NAV with a dividend yield of 3.7%.

Buy with a 185p target price is Liberum’s view.


Inflexion points

  • Rental growth from the portfolio
  • Acquisitions of more healthcare properties
  • Asset management expansion opportunities
  • Deals to reduce debt costs