Investing.com -- Assura Plc (LON:AGRP) has been downgraded to a "hold" from a "buy" rating following a sharp rally in its share price. Deutsche Bank (ETR:DBKGn) analysts adjusted their stance after the stock surged by approximately 15% in response to speculation around a potential takeover bid.
The reassessment comes as the British-based property business’ shares have now re-priced to a modest discount relative to its Net Tangible Assets (NTA), with a dividend yield of around 7.7%.
Previously seen as an attractive investment, the stock’s valuation has now moved closer to its long-term average compared to sector peer PHP, leading analysts to take a more neutral position.
The shift in rating is also influenced by broader market considerations, particularly concerns about the impact of current financial conditions on Assura’s future growth.
While there is speculation that KKR could push forward with an acquisition bid, analysts remain cautious about how far the private equity firm would be willing to go.
Given Assura’s estimated NTA per share for March 2025 of 50.4p, any potential bid would need to exceed the latest indicative offer of 48.0p for the company’s board to seriously consider engaging shareholders. If no formal offer emerges, the stock may have limited upside from current levels.
Despite the downgrade, analysts maintain that Assura’s focus on private hospital developments, particularly those with index-linked leases backed by NHS demand, remains a sound long-term approach. However, ongoing delays in NHS-related rental uplifts continue to weigh on sentiment.
Financially, Assura’s balance sheet remains a key point of discussion. While the company has options to lower its loan-to-value (LTV) ratio—through asset sales on the open market and via its newly formed joint venture—some concerns remain.
Northwest, a major shareholder, has offloaded part of its stake and opted against accepting below-market offers for its remaining 8% holding, creating a degree of overhang on the stock.
Based on demographic trends and the anticipated UK government 10-year healthcare strategy, the primary healthcare sector is expected to remain fundamentally strong going forward.
However, near-term growth projections remain modest, with expected annual earnings and dividend growth of around 2-3%.
Given these factors, Deutsche Bank’s analysts see the current valuation as fair, prompting the decision to move to a Hold rating.
While Assura remains a solid long-term investment within the real estate sector, the recent surge in its share price means that the immediate potential for further gains is now more limited.
Investors will be closely watching for any developments in the M&A landscape and the government’s healthcare funding plans, which could influence the stock’s direction in the months ahead.