12th Feb 2024 13:57
(Alliance News) - Liberum believes Assura PLC's valuation is becoming "increasingly attractive," amid growing opportunities in the private healthcare sector.
The Altrincham, England-based primary care property investor and developer hosted a Capital Markets Day last Thursday plus a visit to the GenesisCare facility in Guildford.
Liberum noted the CMD focussed on two areas where Assura intends to increase its exposure, being the private hospital market and the mental health market.
It said there is a big drive-in investment into the private healthcare market with increasing M&A within the sector.
The private sector is fully embedded into the UK market and becoming increasingly important, Liberum noted, as with an 'explosion' of self-pay, with people growing impatient on NHS waiting lists.
The drivers of demand are well noted being an ageing population, unmet needs, poor service delivery and limited government investment in infrastructure increasing reliance in independent operators, it pointed out.
"Self-pay patients pay a significant premium to obtain the care they need, boosting margins for healthcare providers and therefore improving tenant affordability," Liberum explained.
Liberum said Assura believes that catering to the increased demand for healthcare properties from private healthcare providers is where they can be a part of the solution.
The broker explained Assura aims to focus on private and mental health to benefit from higher yields.
"With yields having shifted out, Assura intends to recycle assets at 4.5% to 5% (NHS assets) into Private and Mental Health (at a c.6.5% yield) as part of their strategy," it said.
Assura's current portfolio comprises GBP156 million of private health assets (around 7% of the rent roll) and GBP56 million of mental health assets.
Management have said that they will let demand dictate the appropriate weighting of their exposure to private healthcare assets, Liberum explained.
Liberum has a 'hold' rating on Assura but thinks the valuation is growing "increasingly attractive".
"Considering the demand underpinning the sector, it is difficult to find fault within the sector, besides the current inability to fund through debt and equity markets which we think is short term in nature," the broker said.
"The CMD highlighted to us that the private market is robust and growing, and ready to fill any voids resulting from the NHS’ lack of funding," it added.
Liberum also pointed out Assura trades at a 17% discount to its estimates of spot net tangible assets and offers an 8.3% dividend yield which "we view as one of the most attractive in the sector considering the strength of the underlying leases".
Shares in Assura rose 1.3% to 43.14 pence in London on Monday.
By Jeremy Cutler, Alliance News reporter
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