The trust, which has a portfolio of GP and medical centre premises with rents guaranteed by the UK and Irish governments, announced last month the intention to acquire management company Nexus Tradeco for £33.1mln, of which half will be paid in cash and a half in shares.
Liberum estimates the plan will result resulting in £4mln a year in cost savings or around a 12% ‘yield’ on the £33mln acquisition cost.
PHP’s intention to internalise should render its business model more comparable to peer Assura, added the broker.
Liberum added that PHP is its favoured Healthcare Real Estate stock:”Relative to Assura, we think it will be able to generate marginally greater rental growth, has greater cope to lower cost of debt, should benefit from greater yield compression through exposure to Ireland and can deliver greater cost savings to government through its larger average floor plate”.
The broker added that PHP’s benchmark cost ratio, while already low, could reduce to single digits while the deal gives an opportunity to benefit from a low cost of debt via refinancing especially as the Ireland opportunity is large.
The dividend yield at PHP is 4.2% vs Assura at 3.9% and UK government 10y yields at 0.2%
Buy is Libreum’s investment view with a price target of 170p compared to the market price today of 147.2p.