The internalisation, which was completed last week via the acquisition of management company Nexus for £33.1mln, “further enhances [PHP’s] position as the most efficient UK REIT, delivers an immediate dividend increase and further improves management alignment”, analysts said in the note to clients on Tuesday.
As well as increasing their combined stake in the REIT to roughly £35mln, the deal also “secures the top management team” and “better aligns them with shareholders”, who resoundingly voted it through.
The deal also includes an £80mln development pipeline, which, alongside Ireland, offers PHP another growth avenue with yields on cost materially higher than standing investment yields
The transaction should lead to £4m of cost savings, which equates to around 4% of earnings, while the price equates to fees outstanding over the length of the contract, and the expected cost savings reflect a 12% return on capital.
Following completion of the deal, PHP company has already announced a 5% increase in the 2021 dividend.
So, while the broker made a small cut to its NAV estimates, these are offset by upgrades to its dividend forecasts, following which PHP trades on a 3.9% dividend yield and 39% NAV premium.
“With PHP looking more attractive than Assura on most key metrics, we upgrade our recommendation,” the analysts said.