Primary Health Properties Share Discussion Threads

[topvest] 17/11/2008 08:15

With regret, I have sold out of PHP. Good returns over 10 years. I was getting jumpy about their debt levels, even with excellent income cover. If you do the maths, a 10% reduction in values slams them close to their 75% LTV covenants.

[kibes] 30/8/2008 12:40

nickcduk - you are right there will not be a lot of polyclinics. In fact according to my GP there will only be two in my area - one in Banbury and one in Reading (ie covering the whole of Oxfordshire and Berkshire). All other current GP surgeries will be closed and all doctors relocated. Sounds crazy? Its what the government is planning and my GP is extremely worried. How will people who can't travel get to see a doctor? They won't. This is why I wonder about PHP properties.

[topvest] 28/8/2008 11:50

Shouldn't impact PHP properties in my opinion as these are, in the main, modern purpose built facilities. Good to see this get back to a sensible, albeit low, valuation.

[kibes] 28/8/2008 10:30

Yes it will probably be another typical government mess whereby they move the doctors out of their buildings but have to carry on paying the leases for 15 years because they cannot find other tenants. Just a drop in the ocean compared to the billions they are wasting on computer systems.

[nickcduk] 27/8/2008 15:28

Wouldn't overly concern yourself with polyclinics. There are not going to be a huge number of them. The modern properties PHP provide will be fit for purpose for a very long time indeed.

[nil desperandum] 27/8/2008 15:19

"No" should probably be replaced by "Minimal"... with a 10-15 year solid lease I think you can sell the asset!

[stupidboypike] 27/8/2008 13:44

Nil,

When you say "no downside" are you allowing for when those leases come to an end. Even if that is 10 or 15 years time that could have a material impact on the properties value much sooner if there is no obvious tennent at the end of this period. I'm not say that is the case I'm just posing the question.

Best regards

SBP

[nil desperandum] 27/8/2008 13:40

No downside effect ... they have long leases.
Upside - more, larger practices needed!

[kibes] 27/8/2008 13:11

The government is trying to reduce the number of practices and force GPs into larger multi-purpose clinics. So the buildings occupied by small practices will become redundant with little resale value because they cannot easily be used for anything else and are in the wrong place. Anyone know whether this is likely to affect PHP?

[mctmct] 26/8/2008 10:51

There's a big up-tick today. Can this really be the IC effect?

[dumpling] 22/8/2008 16:38

Tipped in IC.

[topvest] 19/8/2008 08:32

All things considered, very positive results today from PHP. Underlines the defensive nature of their portfolio.

[mctmct] 30/5/2008 09:07

WICH dropped 18% today on a swing to loss that was almost all due to downward property revaluation. They say their UK property is down 13% in value. Why this wasn't already in the price is amystery - the fall in property values is scarcely a secret.

Any reason why php won't do the same after the next revaluation in June?

[topvest] 13/5/2008 20:09

I presume these were the deals that were in the pipeline as the results announcement suggested taking a more cautious approach to new investment.

[johnrxx99] 13/5/2008 10:30

Suspect a bit of both but as they have the cash they are in the best position for the last 10 years or there abouts.

[makingheaps] 13/5/2008 09:47

Good to see recent acquisitions. Disappointing they don't quote the yields any more. I hope this is due to commercial sensitivity rather than embarassment!

[nil desperandum] 11/4/2008 21:37

Kenny,

please explain

[topvest] 11/4/2008 21:31

Poor dividend rate & lack of cover...you are missing the point- dividend is 6% or so and it is a REIT (and before that had an income distribution policy). It is their strategy to distribute most of their profits by dividend!

[nickcduk] 11/4/2008 16:00

Post results buying. Wouldn't put it down to anything more than that. The dividend alone isn't hugely important here. Its the quality of earnings and the growth in income and NAV to look forward to over the coming years.

[gsands] 11/4/2008 15:47

Kenny,

Thanks for posting your views on this one.

I wonder why the share price is performing so well today, in light of the poor dividend rate and lack of cover. Very odd.

[topvest] 10/4/2008 21:17

Stonking set of results if you ask me. This is a great business for the long term. Happy to hold and will buy more if the right opportunity comes along. Solid c6% yield helps!

[kenny] 10/4/2008 14:39

Either it is a REIT or it is not a REIT - you cannot argue that it should be viewed as both, Nil Desperandum, as suits, and in the same post!

[nil desperandum] 10/4/2008 14:33

As a REIT 90% of income has to be distributed as dividends (I'm not sure how 'income' is defined here but I assume that it's rental income). Hence, if there have been exceptional costs etc the company will sometimes be paying dividends in excess of earnings.

On the management incentive scheme, I was a little concerned about it, because such schemes in general reward handsomely during the good times (capital appreciation) and simply pay nothing during the bad. So I was very pleased to read today that they actually take a 'hit' during the tough times, insomuch as they have to make up the drop before further incentives are paid - that strikes me as a much more reasonable approach.

With NAV around 370p and the company estimates about another 100p if doing a DCF valutaion of the properties, then that seems to me like a very good purchase at say 300p for a 470p adjNAV and a very secure income stream.

I'm happy!

[kenny] 10/4/2008 14:23

The deferred tax adjustment of £29.6m is a one off non-recurring credit so in tems of whether dividends are being paid out of net income you need to exclude it.

So take the loss of £3.7m add in £1.1m net appreciation and you get a total loss on income of -£4.8m. Therefore, the entire dividends are paid out of capital and, the exact opposite of my favourite property company DGRE, are wholly paid out of capital.

I also point out this is for an 18 month period and you cannot ignore the derivate expense as this is a cost of finance.

I guess you could await the 2008 results to see my point on a "clean" set of accounts but if past experience is relevent, it appears a lot of these REIT's are using "tricks" to disguise the true position on their so called "yeilds". Each dividend is reducing the balance sheet so the only hope is capital growth.

[stupidboypike] 10/4/2008 13:40

MakingHeaps.
So being very simplistic, take out the capital appreciation, add back in the extra £1m of rent and £1.8m saved management costs and we have 8.1/10.6 or 0.7641 of this years profits. So without any capital appreciation at all we can afford a dividend of approx 0.7641 x 15.75p i.e. 12.03p. This would equate to approx a 4% yield. Of course the upside is that the rent is pretty well certain and going up each year. I still think that makes php a pretty good buy. Any more thoughts anyone? Apologies if my maths or logic is wrong.

Best regards

SBP