Assura Share Discussion Threads

[scburbs] 23/11/2011 08:24

Muppets.

Yes, the swap may be for 26 years more, but a 13 year payback period (at current interest rates) is a ludicrous decision. The new bond must be saving at least £5m p.a. for 26 years for this to be anything other than complete madness. A new bond (presumably fixed rate) for shorter than the payback period will just look silly. They should just be riding the interest rate cycle not bailing out near the bottom!

They are paying future dividends out of capital in a most blatant way and worse that that they are paying future dividends out of a current equity issue!

Completely overshadows a very strong operational performance.

[goliard] 23/11/2011 07:51

Decent rental increases, but not quite the 5% I was looking for. Still better than the competitors. I have pointed out the issue of the SWAP before and this is now being dealt with. It is however very unfortunate that they have waited until this point to cancel it as realistically it cannot really go any higher and they won't benefit from any future increase in long term rates. At the same time, the bond costs are also at all time lows, so going forward they will be on a very sound footing. This of course means that the interim dividend has been cancelled, which I was hoping would not happen, but I guess it is prudent to do so if they are also raising cash. Not sure how I feel about this, and 30p issue price for new shares is deeply discounted. Do I sell today and buy back later? Will the market punish AGR for the rights issue and mark the shares down? If they do there may be a buying opportunity later. Mixed feelings overall even though the strategy does set the company up for the long term.

[goliard] 15/11/2011 07:48

If history is anything to go by then Assura will probably post rental gains of over 5% when they report their interims as they consistently beat PHP. I'm quite surprised that PHP has not bid for Assura yet, as from what I understand, Assura is now back to being a pure property play. 55p seems perfectly possible. I am sure PHP is considering something and it might be part of their reference to continued opportunities. Most Assura shareholders would welcome a merger and probably accept PHP shares, especially if there was a limited cash alternative. Happy to hold for the dividend for now and my guess is another 1p or 1.5p interim dividend to be announced by Assura later this month.

[scburbs] 15/11/2011 07:41

Solid rental growth continuing in the sector (PHP).

"Average rental growth achieved on rent reviews completed to 30 September 2011 showed an annualised rate of 3.2% which is comparable to that achieved in 2010 and pleasing when analysed in the context of the current economic climate."

[scburbs] 11/10/2011 14:14

With gilt yields continuing to plum the depths and pension funds set to be forced into chasing higher yields a government backed relatively high yield/low risk like AGR should be attractive to pension funds.

QE2 is designed to force investors down the risk curve and it is set to be a complete flop from the perspective of the banks, however, it just might work in respect of pension funds (albeit it will be blowing out the pension deficits for defined benefit schemes in the meantime or will do so if they don't switch to higher yielding assets!).

"UK – Pension funds in the UK should consider property and infrastructure as alternative asset classes in the wake of the Bank of England's new £75bn (€87bn) quantitative easing package, according to Aon Hewitt and the Pension Insurance Corporation.

Yesterday's announcement led to calls from the National Association of Pension Funds for an urgent meeting with the Pensions Regulator amid concerns that falling gilt yields would further drive up scheme liabilities.

...

Asked what alternative asset classes pension funds should consider instead of UK bonds, Colin Robertson, global head of asset allocation at Aon Hewitt, highlighted property."

[goliard] 26/9/2011 20:13

It is written down to zero in the books and they have no further exposure to costs or losses, so if this does make them a profit then it is all upside. I guess Vigin will want the other 25% they don't own if things start to go well.

[scburbs] 26/9/2011 18:13

I had the residual 25% interest in the medical business down as having no value, but they appear to have been appointed preferred bidder on an interesting contract.

"Published: September 19 2011

Assura Medical, which is 75 per cent owned by Virgin, has been named as preferred bidder for a five- year contract worth about £90m a year for community health services in north and west Surrey, beating a bid by Central Surrey Health, the pioneering social enterprise that runs services in the neighbouring area."

...

A spokesman for Assura denied it had put in a loss-leading bid to gain the business. It is a joint partner with 25 GP provider companies around the country, providing 70 different primary and community care services. Assura and Central Surrey said they could not talk about details as the procurement process was still going on. NHS Surrey insisted the evaluation process had been "rigorous"

Assuming its appointment is confirmed, Assura will run eight community hospitals, prison healthcare and a wide range of health visiting, nursing and therapeutic services in people's own homes."

[divinausa1] 25/8/2011 23:07

big trade today at 43p... 10.5m

[goliard] 04/8/2011 08:32

AGR is now the biggest holding I have ever had in many years of investing exactly because it is safe. Lower rates aren't good for their SWAP, which is probably going more negative, but I can live with that. Corporate bonds are in huge demand at the moment and I suspect that AGR will use this to refinance on very good terms. I don't expect to see much development going forward as PCTs stop building, but the yield is excellent and their rent reviews are Market leading. I expect that there will also be consolidation in the sector over the next 2 years and if they are bought out it will be for 55p plus. I am targeting a 6% yield fully covered from profits and the same 6% from price growth, so very happy to hold.

[scburbs] 03/8/2011 08:25

With the 10 year gilt yield hitting record lows and expectations of interest rate rises being pushed further and further out the quasi government tenanted AGR should [but hasn't yet] be benefiting from a flight of capital to safe havens (or their new moniker less worse havens).



The yield gap between AGR's gilt proxy properties and the actual gilt yield is now very wide making AGR look a great investment for someone looking for a cautious investment. Combine that with the current NAV discount and you have a potential for a significant rerating as well as the solid yield.

IMS is due on 15th August and whilst there is much less to look out for these days (which is what should be making it attractive at the moment!), the rental growth rate and the performance of the property development arm will be interesting.

[goliard] 13/7/2011 12:41

I doubt they will do anything before the debt refinancing is completed as they will want to keep their options open, ie use the funds to lower the overall debt, or maybe pay an improved dividend. I am happy to wait as the move back to being a property company may also allow them to take on future developments without more bank finance, which would also be beneficial. 2.5p dividend for next year looks easily achievable and with rent review growth this is an excellent and very safe investment in the current climate. It also wouldn't surprise me to see PHP or MedicX make an offer for Assura which would need to be at about 55p to 60p to be successful. Overall an excellent outlook for the future.

[divinausa1] 13/7/2011 12:00

maybe they will start buying back some shares now....

[divinausa1] 22/6/2011 13:03

i aint selling im in for the divi

3p next time around very nice....

[hybrasil] 22/6/2011 12:40

I really bought for the short term. I felt the index seller had unnnecessarily depressed the price. I was offered 1m at 41p two days ago.Chickened. Ah well!

[kingdiddy] 22/6/2011 11:36

Price action here atm is mental!

[goliard] 22/6/2011 10:30

Actually, Assura is outperforming on rental growth compared to others in the sector and had been for some time. Their property team are clearly maximising the opportunity. They have a slightly different portfolio in that they have some older properties so they are able to get better uplifts. You really can't compare this to property companies outside the sector. As scburbs says, it is all about the risk profile. This is effectively a bond, but with annual increases in yield. Next year's yield on a purchase made today will be close to 7%.

[scburbs] 21/6/2011 18:43

Skyship,

I meant the rental growth they were achieving on review which was an annualised 4.3%, rather than 4.3% on the entire rents. There are 12% of the leases that are RPI linked so the other leases are subject to market conditions for rental growth, but rental growth has remained positive throughout the credit crunch.

Reviews are not undertaken every year, but when they are they are achieving a good annualised growth across the sector. PHP's latest statement was achieving similar annualised levels albeit slightly lower.

"Growth achieved on rent reviews concluded in 2010 averaged 10.0%, which equates to an annualised rate of 3.22% over the typical three year rent review cycle of the sector."

MedicX also showing solid rental growth, although again slightly lower.

"£1.6 million rent reviews agreed since 1 October 2010 with the equivalent of an average 2.6% per annum increase, 1.9% from open market reviews, 4.2% from RPI reviews, and 2.5% from fixed uplifts"

[hectorp] 21/6/2011 18:36

Brilliant debating scburbs. Occasionally ADVFN is worth its salt.

Skyship ( I refuse to acknowledge the caps) The debate comparing apples with onions could run and run. True, who would trust the Government. At least it's not the Syrian one.

- off topic, just noticed the 'Government' in London just made it a criminal offence to squat.
What are criminals supposed to do next? lie on the ground?

[skyship] 21/6/2011 17:51

Recent history suggest that UK Government is a far from secure tenant; still I take your point.

Is that 4.3% rental growth because they are linked to an annual CPI mark-up?

Interesting after-hours trades by the way...

[scburbs] 21/6/2011 16:34

In practical terms AGR yields less and has a lower discount to NAV than certain property stocks for the same reasons than German/UK bonds have lower yields/discounts than Spanish/Italian bonds (Greece et al would probably be an unfair comparison unless Southern Cross or JJB Sports were your tenant!).

The lower yield/discount does not, of itself, make them a worse investment it's all about the strength of the borrower/tenant.

[scburbs] 21/6/2011 16:21

Afternoon Skyship,

The only comparable companies that I am aware of are PHP and MedicX. They are all owners of medical centres on long term leases to government tenants.

Not all property companies are the same. You can't compare a company with growing rents (4.3%) on long term leases to the government with a property company with exposure to massive tenant risk (chalk and cheese springs to mind). At least you can't compare them by using dividend yield, LTV and NAV discount alone.

PSPI yields 10% and a significant discount to NAV because investors are worried about tenant risk of European Care. This does not clearly make it better value than AGR without a detailed assessment of tenant risk. I hold both, but am clear that the risk differential is very material.

AGR/PHP and MedicX are more like proxies for UK government bonds than they are for other property companies. The 15 year government bond yield is 3.77%. This is probably the closest comparable. However, in practice (due to the rental growth prospects) the comparison should be with the 15 year inflation linked government bond which is probably at least 2% lower (this is a prudent guess, I do not know the correct yield for this).

With AGR you get a 5.6% dividend yield (at 40p) and growing, increasing rents and a discount to net assets. The key reasons property stocks trade at a discount to net assets is primarily tenant risk (either default, reletting risk or a lack of rental growth prospects) as well as overgearing or prospective falling valuations. If you have a sensible gearing, good rental growth prospects and a government tenant then why should you trade at a discount to net assets?

One sensible ultra cautious play might be to go short MedicX and long Assura to deal with the risk that using MedicX as a valuation comparison is flawed for the reason that MedicX is overvalued.

[skyship] 21/6/2011 14:56

Hmm... Regular poster here, Hybrasil, alerted me to these last week @ 39p.

Obviously missed a quick turn; but at anything over 40p they seem a tad expensive compared to the likes of property plays IFD & MCKS; especially with L&G still reducing.

With IFD & MCKS, in both cases the yields are higher (IFD 9.3%, MCKS 6.6%), the NAV discounts higher (IFD 34%, MCKS 43%) and the LTVs lower (IFD 37%; MCKS 43%).

Also I don't see why AGR should be trading at a premium to NAV, the comparisons being drawn to PHP & MedicX, rather than PSPI.

Could be right to be holding them all of course; but on balance, still need to be convinced.