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PRIMARY HEALTH PROPERTIES PLC

PHP JSE Listed
Market Cap
~R58.6 Billion

Role: Senior Equity Analyst (JSE) Subject: Investment Analysis – Primary Health Properties PLC (JSE: PHP) Date: 13 January 2026

Here is the comprehensive investment analysis for Primary Health Properties PLC (PHP), a UK-based Real Estate Investment Trust (REIT) inward listed on the JSE.

Step 1: Data Gathering & Source Verification

Reporting Periods Analyzed:

Key SENS Announcements (Last 12 Months):

  • 13 Jan 2026: Update to Notice of Interim Dividend (Currency exchange rate fixed at 22.06900 ZAR:GBP).
  • 29 Oct 2025: Acquisition of Assura plc – CMA Phase 1 Clearance (Merger approval).
  • 24 Jul 2025: Unaudited Interim Results for six months ended 30 June 2025.
  • 03 Apr 2025: Terms of Combination with Assura plc (Strategic M&A announcement).

Step 2: Metric Extraction

  • Market Cap: ~R58.6 Billion (ZAR).

  • Note: This reflects the combined entity post-Assura merger.

  • Dividend Yield (L12M): 7.3% - 7.6%

  • Calculation: Based on a forward annualized dividend of ~7.3p (approx. 161 ZARc) relative to the current share price of ~2257 ZARc.

  • Note: Dividends are subject to a 20% UK withholding tax, though SA residents can claim a partial rebate/credit depending on their tax status.

  • Liquidity Check: Medium / Mixed Risk (JSE Only)

  • Metric: Average daily volume on the JSE is approx. 340,000 shares (Value ~R7.6m/day).

  • Flag: While the primary listing in London (LSE) is highly liquid, the JSE inward listing can experience thinner volumes. Retail investors will find sufficient liquidity, but large block trades may require care.

  • P/E Ratio: 15.2x

  • Context: Reasonable for a high-quality REIT, reflecting the premium for government-backed income.

  • Net Asset Value (NAV): 106.2 pence (approx. R23.43)

  • Metric Used: Adjusted Net Tangible Assets (NTA) per share as of 30 June 2025.
  • Price-to-NAV: The stock is trading at a roughly 3-4% discount to its last reported NAV (Price ~R22.57 vs NAV ~R23.43).

Step 3: Operational & Strategic Analysis

Business Overview: PHP is a dedicated healthcare REIT. It owns and manages a portfolio of modern primary healthcare facilities (GP surgeries, pharmacies, dental clinics) in the UK and Ireland.

  • Core Revenue: 89% of its rent roll is funded directly or indirectly by government bodies (NHS in the UK, HSE in Ireland), effectively making this a sovereign-backed income stream.

Performance Trend (Interim 2025 vs Prior):

  • Revenue: Expanding. Net rental income increased by 3.1% to £78.6m in H1 2025.
  • Margins: Stable. Adjusted earnings rose 2.2%. The company has successfully passed "inflexion point" in property yields, which have stabilized at 5.25%.
  • Strategic Shift: The massive merger with Assura plc (completed late 2025) creates a £6bn healthcare giant. Synergies of £5.4m (60% of target) have already been realized as of Jan 2026.

Sector Context (Macro Factor):

  • Interest Rates & Yields: The UK REIT sector has been battered by high interest rates, which increased the cost of debt and softened property valuations. However, with UK inflation normalizing and rates projected to stabilize or cut in 2026, the "yield gap" (property yield vs. risk-free rate) is becoming attractive again.
  • NHS Policy: The UK Government's new "10-Year Health Plan" (July 2025) explicitly prioritizes shifting care from hospitals to communities—directly benefiting PHP's portfolio of local clinics.

Step 4: The Verdict

Bull Case (Buy Rationale): Sovereign Security with M&A Upside. You are effectively buying UK government debt (via NHS rent) with a property kicker. The merger with Assura provides massive scale, reducing overheads and increasing bargaining power. With 99% occupancy and 20+ year lease structures, the cash flow is arguably safer than many sovereign bonds.

Bear Case (Sell Rationale): Currency & Tax Friction. For a South African investor, the returns are diluted by the 20% UK Withholding Tax (WHT). While double-taxation agreements exist, the administrative burden is real, and the net yield after SA Dividends Tax + UK WHT can be underwhelming compared to local SA REITs (like Growthpoint or Redefine) which yield 10%+.

Fair Value Estimate: R23.50 - R24.50 Based on a target Price-to-NAV of 1.0x to 1.05x. The stock currently trades slightly below its intrinsic asset value (NAV ~R23.43), offering a small margin of safety.

Final Rating: BUY (Long Term)

Rationale: The discount to NAV is unjustified given the quality of the income stream and the successful integration of Assura. This is a "sleep-well-at-night" stock for defensive portfolios, serving as a solid Rand-hedge despite the tax friction.

AI Generated Analysis Last Updated: 2026-01-14