On Wednesday, Assura Plc. (AGR:LN) (OTC: ARSSF), a healthcare real estate investment trust, saw its stock rating downgraded from Buy to Hold by a Jefferies analyst.
The firm also reduced its price target for Assura from GBP0.52 to GBP0.45. The move reflects concerns over the company's loan-to-value (LTV) ratio, which stands at 43% following a new joint venture.
The analyst indicated that Assura needs to take further steps to mitigate the risk of a credit rating downgrade. Potential strategies to address these risks include an equity injection, as the shares currently trade at a 13% discount to net asset value (NAV), asset disposals, which could dilute earnings by approximately 300-400 basis points, and curbing development activities due to Assura being priced out of the market.
The revised price target of GBP0.45 takes into account the expected dilutive impact of around £200 million per annum in high yield/low growth asset sales, which are estimated to reduce the company's gearing to 30%. However, there is a concern that the 7.8% dividend yield could be at risk of being uncovered by financial year 2025, with a coverage ratio of 1x.
Assura's shares have been downgraded to reflect the potential challenges the company faces in maintaining its credit profile and dividend payouts in the face of necessary de-leveraging actions. The company's future steps to manage its LTV and credit risks will be closely watched by investors.
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