Research that is free to access for all investors. Companies commission these providers to write research about them.
Brokers who write research on their corporate clients and make it available through our main bundle offering.
Research that is paid for directly by asset managers. Only accessible to institutional investors permissioned for access.
Event in Progress:
View the latest research on other companies in the sector.
MedicX continues to reposition itself towards becoming the best placed primary healthcare REIT; with the youngest, largest and longest-leased estate. This provides a platform for long-term attractive returns. Against an uncertain economic backdrop the relative low-risk nature of its income provides added attraction. Following FY18 results we increase NAV and earnings by ~2%. The shares trade on a CY19E P/NAV of 0.92x and DPS yield of 4.9%.
Medicx Fund
MedicX delivered a strong full year with NAV +7% to 81.8p, 3% ahead of our forecast. Encouragingly rent reviews increased +1.6% and a recent arbitration in Clapham provides the basis for further improved growth. MedicX remains active, but disciplined, in targeting expansion through larger primary care properties across the UK and Ireland; a strategy which we believe will provide superior long-term returns. Following the earlier decision to re-base the dividend, portfolio fees have also now been reduced and the performance fee abolished, increasing EPS by 3% and enhancing the investment case. MedicX continues to reposition itself towards becoming the best placed primary healthcare REIT; with the youngest, largest and longest-leased estate alongside strong return prospects. Added to this, the shares trade on a CY19E P/NAV of 0.91x with a fully covered DPS yield of 5.0%.
SQN Secured Income – 2019 growth strategy | Medicx – Finals to 30 September 2018 | Hipgnosis Songs – Interims to 30 September 2018 | Electra Private Equity – Finals to 30 September 2018
Medicx Fund Unbound Group plc GBP
MedicX will report its results for the year ended 30 September 2018 in December. H218 included a significant portfolio acquisition and an important restructuring of some long-term debt facilities, increasing the company’s borrowing flexibility and extending its facilities at a lower marginal cost. NAV total return during Q3 was a strong 3.4%, following 8.0% in H118, while the pipeline of identified investment opportunities in the UK and the Republic of Ireland remained strong. The shares offer an attractive prospective yield of 4.8%, with full dividend cover, and currently trade at a small discount to NAV.
MedicX has delivered a good third quarter with NAV +1.5% to 80.8p, aided by market yield compression. Rent reviews increased +1.3% and an arbitration in Clapham has resulted in a 35% increase in rent which should provide the basis for improved rental growth across London. MedicX’s targeted expansion of larger primary care properties across the UK and Ireland continues and we believe this provides a platform for superior returns. We forecast 10% p.a. total returns across our forecast period. The shares trade on a CY18E P/NAV of 1.01x with a CY19E covered DPS yield of 4.6%.
MedicX’s targeted expansion of larger primary care properties across the UK and Ireland provides a platform for superior returns vs. peers. This opportunity exists against a backdrop of one of the most consistent sub-sectors of UK real estate, with long-term structural growth and low relative risk. We forecast 10% total returns above peers. We initiate with a BUY and 90p target price.
H118 results from MedicX Fund saw continued portfolio and rental growth, with costs well controlled. The positive results were accompanied by a new dividend policy, which will rebalance total returns partly away from dividends paid and more towards capital growth. From FY19 it targets a lower, fully covered DPS, conserving cash flow and providing greater flexibility to sustainably fund further accretive asset growth. The FY19 prospective dividend yield of c 5% remains attractive and the shares are priced at a c 10% P/NAV discount to peers.
MedicX Fund produced a 3.9% EPRA NAV total return in the three months ended 31 December 2017, with EPRA NAV per share increasing to 78.0p from 76.5p, and including the 1.50p dividend per share paid in the period. A quarterly dividend of 1.51p per share has been approved for payment in March and the fund still targets an aggregate 6.04p payout for the year to 30 September 2018. Capital commitments continued in the period and the pipeline of acquisition opportunities remains strong. While investment advisor fees remain frozen, asset growth should have a geared impact on earnings, contributing towards increased dividend cover.
FY17 saw steady underlying growth in the investment portfolio and recurring earnings. Overall returns were further enhanced by positive revaluation movements reflecting continued tightening in market yields. Investment in development schemes had a limited impact on earnings in FY17 but completions and continuing acquisitions from a strong pipeline offer good growth prospects. The dividend has been increased and MedicX Fund (MXF) expects to pay 6.04p in respect of FY18, a yield of 7.1%, supported by growing highly secure, long-term income derived mainly from government sources.
MedicX Fund Limited’s portfolio of primary healthcare assets is effectively fully let with 89% of rents paid directly or indirectly by the UK and Irish governments. These have a weighted average unexpired lease term of more than 14 years, providing a secure and predictable income stream that supports a 6.7% dividend yield, which we expect to be 59% covered by EPRA earnings (excluding non-cash profits) in FY17e, rising to 64% in FY18e. A recent NAV update showed that yields in the sector continue to fall, contributing to positive valuation gains on top of dependable rents.
MedicX Fund’s (MXF, MedicX) H117 results show a higher level of investment than we had assumed, with Irish acquisitions funded from equity issuance at a substantial premium to NAV. This, together with continued yield compression, has increased EPRA NAV to 74.4p per share, above our forecasts, while slightly diluting EPRA EPS, and therefore reducing dividend cover. The dividend has been increased and MXF expects to pay 6p in respect of 2017, equating to a yield of 6.7% on the current share price, supported by highly secure, long-term income derived mainly from government sources.
MedicX Fund’s (MXF) FY16 results show progress on several key measures including adjusted EPS, EPRA NAV, DPS and dividend cover: EPRA NAV total return for the year was 11.8%. The portfolio was expanded while the cost of debt remained unchanged and its maturity is still closely matched to unexpired lease lengths. A change of the advisory agreement will reduce future incremental fees and the board is examining the benefits of converting the fund to a REIT. We have slightly adjusted our FY17 estimates to take account of better-than-expected performance in FY16 and expected future yield compression, and extended these into FY18.
Continuing yield compression generated additional valuation gains in Q3, while selective acquisitions continue at MedicX. The EU referendum result has no impact on the fundamental drivers of primary care and we doubt that the political will to deliver healthcare reforms will be dented. As a long-term investor in a broad portfolio of modern primary care properties, MedicX Fund has very secure, long-term cash flows to support the c 6.7% progressive dividend yield, while portfolio growth is increasing dividend cover. Lease duration is long and quasi-government backed, while debt is of similar duration with the cost fixed (gearing of 52.3% at 31 March 2016).
In H116 MedicX Fund continued to selectively add assets, despite a highly competitive UK investment market, and it maintains a strong investment pipeline in both the UK and Republic of Ireland. Profit progression during the period was limited by the time between drawing on funding and income generation from investment; as this unwinds, earnings growth should pick up, supported by the new management fee structure. As a long-term investor in modern primary care properties in the UK and the Republic of Ireland, the fund should benefit from growing demand to meet healthcare needs. Leases are long, substantially government backed, and funded by fixed rate debt (c 52% LTV) of similar duration, underpinning secure cash flows to support the 6.8% prospective yield.
Further property acquisitions and continued yield compression has seen the Fund’s rent roll and NAV per share continue to increase in Q116. The recent FY15 results showed strong underlying profit growth with operational gearing on target. A revised management fee will limit cost increases going forward. MXF is a long-term investor in a portfolio of modern primary care properties in the UK and the Republic of Ireland on long, quasi government-backed leases. Similar duration fixed-rate debt at modest (c 50%) gearing underpins secure cash flows to support the c 7% prospective yield.
Strong valuation gains, primarily the result of further yield contraction, have continued in Q2. Adjusted NAV has increased despite continuing dividend distributions. Asset growth appears consistent with our estimates and our underlying forecasts (excluding valuation gains) are unchanged. NHS planning suggests good growth prospects for the primary care property sector, and MedicX Fund offers a low-risk approach; it is neither developer nor operator but a long-term investor. A broad portfolio of modern primary care properties, long, quasi government-backed leases, and similar duration fixed-rate debt with modest (c 50%) gearing, provide secure cash flows to support the greater than 7% prospective yield.
NHS planning suggests good growth prospects for the primary care property sector, and the election result suggests policy continuity. MedicX Fund offers a low-risk approach; it is neither developer nor operator but a long-term investor. A broad portfolio of modern primary care properties, long, quasi government-backed, leases, and similar duration fixed-rate debt with modest (c 50%) gearing, provide secure cash flows to support the c 7.2% prospective yield. Interim results show earnings growth on track with dividend cover building.
I had expected to have a rant writing up MXF, but the logic of the investment model is better than anticipated. However, neither its premium valuation or dividend stack up. MXF’s key risk is that the market, by valuing the fund on a 34% premium, has already priced in 1-2 years of a return that assumes a lot of yield compression. Given MXF has an explicit strategy of raising additional equity capital to finance both the dividend and its £100m pipeline and that direct competitors trade on lower premiums with better dividend cover (albeit at the expense of a more sustainable yield), we believe shareholder risks are on the downside.
Share: