New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Vital Healthcare Property Trust / Equity Bottom-Up

<h2>Vital Healthcare (VHP)</h2>
1H20 result — first impressions
VHP has reported a&nbsp;solid&nbsp;1H20 result with net distributable income (and AFFO) of NZ$22.1m, ahead of our forecast of NZ$20.2m and up +12.4% on the pcp and helped by a slightly lower interest expense than forecast. Net property income was in line with forecasts at NZ$49.9m up +2.1% driven by structured rent reviews and development activity. The like-for-like same currency&nbsp;rental growth was +2.5%.
Following an interim revaluation gain of NZ$42.6m, the NTA is up +2.2% since 30 June 2019 to NZ$2.36. The revaluation gain was partially offset by new units issued for the management fee. The portfolio cap rate firmed 9 bps to 5.52%. Gearing is steady at 35.1%. &nbsp;
The 2Q20 dividend was&nbsp;2.19cpu (record date 12 March / 26 payment date 26 March), providing a flat 1H20 dividend of&nbsp;4.375cpu. The 1H dividend&nbsp;was&nbsp;89% of VHP’s calculated AFFO per unit.
The portfolio remains full at 99.5% occupancy and the long WALT is maintained at 17.9&nbsp;years. The lease expiry profile remains benign averaging 1.6% pa over the next 10 years.
VHP has commenced NZ$267m of development projects and has spent NZ$72m to date.&nbsp;The two major projects&nbsp;underway remain&nbsp;Wakefield Hospital in Wellington and Epworth in Melbourne.
VHP has&nbsp;previously&nbsp;highlighted an interest in aged care sector acquisitions and it has agreed terms with regard to purchasing three Australian aged care assets from NorthWest (still subject to due diligence). While VHP is still looking to divest some non-core assets, nothing is expected to complete in FY20.
Outlook and ASX Foreign exempt listing proposal
VHP has reaffirmed its dividend guidance for FY20&nbsp;as being not less than the 8.75cpu n the pcp. Our forecast is 9.0cpu and we don’t expect to change our numbers.
VHP expects to lift its dividend pay-out rate following its foreign exempt listing on the ASX and related capital structure changes. Unit holders should receive notice of meeting documentation to consider over the coming weeks with a Special Unitholder Meeting expected to be held in late March
Conference call tomorrow 20 February at 11.30am (NZ time)
Phone NZ 0800 122 360, AU 1 800 760 146 Conference ID 10003795.
1H20 result summary (NZ$m)
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1658940404875875147&amp;th=1705bd82402b534b&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-4sEadrpJ-_Za1lnZtUr2JQW36yxaiL9aRRODDyVKsKwL6A0oIZvK3Yr_Wt0CZ0BOfxnrI9cRY0I8mE6-dTxtNRPMFU9VVQLkuJgZ0FLgNYoNeMB95SfLp5IY&amp;disp=emb" width="582" height="145" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr analysis
Jeremy Simpson &nbsp;CFA Director / Senior Analyst, Equities Forsyth Barr Limited&nbsp;
M: +64 21 995 998 |P: +64 9 368 0022 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Vital Healthcare (VHP)
1H20 result — first impressions
VHP has reported a&nbsp;solid&nbsp;1H20 result with net distributable income (and AFFO) of NZ$22.1m, ahead of our forecast of NZ$20.2m and up +12.4% on the pcp and helped by a slightly lower interest expense than forecast. Net property income was in line with forecasts at NZ$49.9m up +2.1% driven by structured rent reviews and development activity. The like-for-like same currency&nbsp;rental growth was +2.5%.
Following an interim revaluation gain of NZ$42.6m, the NTA is up +2.2% since 30 June 2019 to NZ$2.36. The revaluation gain was partially offset by new units issued for the management fee. The portfolio cap rate firmed 9 bps to 5.52%. Gearing is steady at 35.1%. &nbsp;
The 2Q20 dividend was&nbsp;2.19cpu (record date 12 March / 26 payment date 26 March), providing a flat 1H20 dividend of&nbsp;4.375cpu. The 1H dividend&nbsp;was&nbsp;89% of VHP’s calculated AFFO per unit.
The portfolio remains full at 99.5% occupancy and the long WALT is maintained at 17.9&nbsp;years. The lease expiry profile remains benign averaging 1.6% pa over the next 10 years.
VHP has commenced NZ$267m of development projects and has spent NZ$72m to date.&nbsp;The two major projects&nbsp;underway remain&nbsp;Wakefield Hospital in Wellington and Epworth in Melbourne.
VHP has&nbsp;previously&nbsp;highlighted an interest in aged care sector acquisitions and it has agreed terms with regard to purchasing three Australian aged care assets from NorthWest (still subject to due diligence). While VHP is still looking to divest some non-core assets, nothing is expected to complete in FY20.
Outlook and ASX Foreign exempt listing proposal
VHP has reaffirmed its dividend guidance for FY20&nbsp;as being not less than the 8.75cpu n the pcp. Our forecast is 9.0cpu and we don’t expect to change our numbers.
VHP expects to lift its dividend pay-out rate following its foreign exempt listing on the ASX and related capital structure changes. Unit holders should receive notice of meeting documentation to consider over the coming weeks with a Special Unitholder Meeting expected to be held in late March
Conference call tomorrow 20 February at 11.30am (NZ time)
Phone NZ 0800 122 360, AU 1 800 760 146 Conference ID 10003795.
1H20 result summary (NZ$m)

Source: Forsyth Barr analysis
Jeremy Simpson &nbsp;CFA Director / Senior Analyst, Equities Forsyth Barr Limited&nbsp;
M: +64 21 995 998 |P: +64 9 368 0022 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Vital Healthcare (VHP): 1H20 Result — First Impressions