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).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Vital Healthcare Property Trust / Equity Bottom-Up

<h2>Vital Healthcare FY21 –&nbsp;Solid result, DPS guidance slightly ahead of expectations on higher payout</h2>
VHP has reported FY21 AFFO +22% to NZ$57.5m reflecting higher rental income from acquisitions and developments. The result was&nbsp;+5% vs. our expectations with the key variances&nbsp;being stronger rental income and lower tax. Looking forward, VHP guided to FY22 AFFO of 11.8cps and DPU of 9.5cps, while AFFO is in line with our current forecasts dividend guidance is slightly above our estimate of 9.3cps.
While the stronger dividend guidance is a positive we see nothing material to change our NEUTRAL rating. With recent acquisitions expanding VHPs uncommitted developments to NZ$740m and committed gearing at c.39% on our calculations we believe significant development commitments likely require asset sales or additional capital.
Key takeouts:
<ul>
<li>The portfolio remains full at 99.2% occupancy and WALT lifted to 18.7 years. The lease expiry profile remains benign with 1.7% of rent expiring FY22 and averaging 1.6% pa over the next 10 years. Like-for-like same currency rental growth was +1.5%. 95% of rental income is subject to structured rent reviews. Recent acquisitions and the break-up of Healthe.care reduces VHP’s tenant concentration.</li>
<li>NTA lifted +34cps to NZ$2.89 on the back of a NZ$175m 2H21 revaluation gain which largely reflected cap rate compression (cap rates firmed 45bp). Demand for long lease assets with structural tailwinds remains strong and there is increased institutional demand for assets in the medical subsector.</li>
<li>VHP has commenced NZ$312m of development projects with NZ$136m remaining to be spent. Stage 1 of Wakefield Hospital is now complete (NZ$113m total spend completing 2021-23).</li>
<li>VHP completed NZ$110m of acquisitions in 2H21 which included three development sites (2 in Queensland and 1 in Auckland).VHP targets ~10–15% of assets under management being development assets and has indicated it has a further NZ$740m+ of potential developments within its current portfolio.</li>
<li>Gearing decreased increased 2.6 ppts to 35.0% (was 32.4% 1H21) driven by development capex and acquisitions more than offsetting the 2H21 revaluation gain. Committed gearing remains close to 40% on our numbers and as such we believe significant development commitments likely require further assets sales or additional capital.</li>
</ul>
Conference call at&nbsp;9.00am
Webcast:&nbsp;<a href="https://services.choruscall.com.au/webcast/vitalhealthcare-210812.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://services.choruscall.com.au/webcast/vitalhealthcare-210812.html&amp;source=gmail&amp;ust=1628812780220000&amp;usg=AFQjCNG02tPpxqS89uzNvigPaOC4PYwl4w" rel="noopener">https://services.choruscall.com.au/webcast/vitalhealthcare-210812.html</a>
FY21 result summary
<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:1707833168074585238&amp;th=17b37137c6b73496&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8HsI9NGu1dyqxLkjiMCnsDWM48LJJYPj-SKuD26fHAoNiwmI3qV-VYEKK4Y9R1gDt-GWmatENQIu_P2OZAle0Cc8gstuLnVhRtCsPSYMUE_sqpmz8GKr-ZmjE&amp;disp=emb" width="582" height="511" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Forsyth Barr, Company reports
Rohan Koreman-Smit Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1707833168074585238&amp;th=17b37137c6b73496&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-awYYOrenRhdUnK5JXigo9xtZhNkqQDKuEibDXo23YKSsg407ycwTAmqYIzSbTw_8Tn4ARRfxoTV7cV9fe-08k2U2d5y0TwtgOr8Ekm56_ieUqCUYnLAUYrIQ&amp;disp=emb" class="editor-image img-responsive"></figure>
 P:&nbsp;<a href="tel:+6493680085" target="_blank" data-sk="tooltip_parent" rel="noopener">+64 9 368 0085</a>&nbsp;| TF: 0800 367 227 Level 23, Shortland &amp; Fort, 88 Shortland Street, Auckland

Vital Healthcare FY21 –&nbsp;Solid result, DPS guidance slightly ahead of expectations on higher payout
VHP has reported FY21 AFFO +22% to NZ$57.5m reflecting higher rental income from acquisitions and developments. The result was&nbsp;+5% vs. our expectations with the key variances&nbsp;being stronger rental income and lower tax. Looking forward, VHP guided to FY22 AFFO of 11.8cps and DPU of 9.5cps, while AFFO is in line with our current forecasts dividend guidance is slightly above our estimate of 9.3cps.
While the stronger dividend guidance is a positive we see nothing material to change our NEUTRAL rating. With recent acquisitions expanding VHPs uncommitted developments to NZ$740m and committed gearing at c.39% on our calculations we believe significant development commitments likely require asset sales or additional capital.
Key takeouts:

The portfolio remains full at 99.2% occupancy and WALT lifted to 18.7 years. The lease expiry profile remains benign with 1.7% of rent expiring FY22 and averaging 1.6% pa over the next 10 years. Like-for-like same currency rental growth was +1.5%. 95% of rental income is subject to structured rent reviews. Recent acquisitions and the break-up of Healthe.care reduces VHP’s tenant concentration.
NTA lifted +34cps to NZ$2.89 on the back of a NZ$175m 2H21 revaluation gain which largely reflected cap rate compression (cap rates firmed 45bp). Demand for long lease assets with structural tailwinds remains strong and there is increased institutional demand for assets in the medical subsector.
VHP has commenced NZ$312m of development projects with NZ$136m remaining to be spent. Stage 1 of Wakefield Hospital is now complete (NZ$113m total spend completing 2021-23).
VHP completed NZ$110m of acquisitions in 2H21 which included three development sites (2 in Queensland and 1 in Auckland).VHP targets ~10–15% of assets under management being development assets and has indicated it has a further NZ$740m+ of potential developments within its current portfolio.
Gearing decreased increased 2.6 ppts to 35.0% (was 32.4% 1H21) driven by development capex and acquisitions more than offsetting the 2H21 revaluation gain. Committed gearing remains close to 40% on our numbers and as such we believe significant development commitments likely require further assets sales or additional capital.

Conference call at&nbsp;9.00am
Webcast:&nbsp;https://services.choruscall.com.au/webcast/vitalhealthcare-210812.html
FY21 result summary

Source: Forsyth Barr, Company reports
Rohan Koreman-Smit Senior Analyst, Equities

 P:&nbsp;+64 9 368 0085&nbsp;| TF: 0800 367 227 Level 23, Shortland &amp; Fort, 88 Shortland Street, Auckland

Vital Healthcare (VHP): FY21 - Solid Result, FY22 DPS Guidance 9.5cps