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Impact Healthcare REIT: Positive Q421 returns

Published 09/02/2022, 11:45
Updated 17/08/2023, 13:25

Impact Healthcare REIT’s unaudited NAV data for the three months to 31 December 2021 (Q421) show the consistent trend of positive quarterly NAV total returns since IPO continuing. The FY21 DPS target has been met and FY22 DPS is targeted to increase further, supported by long-term inflation-linked leases. With a significant pipeline of identified investment opportunities, Impact is seeking additional equity funding. Our forecasts are as published prior to the equity issue announcement and NAV update.

EPS Estimates

2.0% Q421 NAV total return

Unaudited net asset value (NAV) as at 31 December 2021 (Q421) increased to £394.2m or 112.43p per share (Q321: 111.8p) and, including the DPS paid, the quarterly unaudited NAV total return was 2.0%. Including the 1.6025p Q421 DPS declared, Impact has met the aggregate 6.41p target that was set for FY21.The group has recently set a target of 6.54p for FY22 (+2.0%) in line with its progressive dividend policy whereby targeted DPS growth is driven by inflation-linked rent increases achieved in the prior financial year. Supported by full rent collection (with no lease variations), FY21 DPS was well covered by EPRA earnings (126%) and fully covered by adjusted earnings (104%), with Q421 cover at 127% and 107% respectively. All of the group's rental income is linked to inflation, primarily RPI, with floors and caps, and this has continued to support income and capital growth.

Seeking equity capital for growth

With the UK care home real estate market supported by robust long-term structural drivers and demographic fundamentals, Impact is seeking to raise gross proceeds of not less than £50m through an initial issue of new ordinary shares at 114.0p per share by way of an open offer, initial placing, offer for subscription and intermediaries offer. The proceeds will initially be used to repay existing flexible debt facilities but will support further portfolio growth. The group has £69m of acquisitions in advanced legal discussions and a medium- to longer term-investment pipeline of over £290m. Impact says these potential investment opportunities are managed by high-quality operators, are well maintained, offer attractive levels of rent cover and a blended net initial yield in line with previous acquisitions.

Valuation: Robust, indexed, long-term income

Impact’s targeted FY22 DPS of 6.54p represents a 5.9% yield on the 114p issue price for the new shares. The issue price is at a c 1% premium to FY21 unaudited NAV.

Share price performance

Share price performance

Business description

Impact Healthcare REIT, traded on the Main Market of the London Stock Exchange, invests in a diversified portfolio of UK healthcare assets, primarily residential and nursing care homes, let on long leases to high-quality operators. It aims to provide shareholders with attractive and sustainable returns, primarily in the form of dividends, underpinned by structural growth in demand for care.

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