Primary Health Properties PLC: Update - Revision history

94.119.64.2 at 12:50, 13 December 2022

2022-12-13T12:50:06Z

← Older revision		Revision as of 13:50, 13 December 2022
Line 3:		Line 3:
	* Primary Health Properties, the FTSE 250 healthcare real estate investment company, has announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which we estimate will take place between 1st April 2024 and 11th June 2024.		* Primary Health Properties, the FTSE 250 healthcare real estate investment company, has announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which we estimate will take place between 1st April 2024 and 11th June 2024.
	* The company previously indicated that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.		* The company previously indicated that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.
	* Accordingly, we have maintained our forecasts, continue to note that the degree of risk associated with an investment in Primary Health Properties is relatively 'low' and remain of the view that ~~believe~~ the valuation is attractive		* Accordingly, we have maintained our forecasts, continue to note that the degree of risk associated with an investment in Primary Health Properties is relatively low and remain of the view that the valuation of the company is attractive.
	*		*
	*		*
	*with the company's shares having an adjusted beta<ref name=":0">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Primary Health Properties' adjusted beta (5 years, monthly data) is 0.531, and is, accordingly, 47% below the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (-47%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref> that is 47% below the market (0.531 vs. 1).

	== Succession Planning ==		== Succession Planning ==

94.119.64.35 at 12:34, 13 December 2022

2022-12-13T12:34:40Z

← Older revision		Revision as of 13:34, 13 December 2022
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	* Primary Health Properties, the FTSE 250 healthcare real estate investment company, has announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which we estimate will take place between 1st April 2024 and 11th June 2024.		* Primary Health Properties, the FTSE 250 healthcare real estate investment company, has announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which we estimate will take place between 1st April 2024 and 11th June 2024.
	* The company previously indicated that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.		* The company previously indicated that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.
	* Accordingly, we have maintained our forecasts, ~~and reiterate our positive view on the stock.~~		* Accordingly, we have maintained our forecasts, continue to note that the degree of risk associated with an investment in Primary Health Properties is relatively 'low' and remain of the view that believe the valuation is attractive
	* We note that the degree of risk associated with an investment in Primary Health Properties is relatively 'low', with the company's shares having an adjusted beta<ref name=":0">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Primary Health Properties' adjusted beta (5 years, monthly data) is 0.531, and is, accordingly, 47% below the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (-47%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref> that is 47% below the market (0.531 vs. 1).		*
			*
			*with the company's shares having an adjusted beta<ref name=":0">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Primary Health Properties' adjusted beta (5 years, monthly data) is 0.531, and is, accordingly, 47% below the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (-47%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref> that is 47% below the market (0.531 vs. 1).

	== Succession Planning ==		== Succession Planning ==
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	* Dividend growth every year since inception (i.e. for 26 years).		* Dividend growth every year since inception (i.e. for 26 years).
	* 89% of rents are covered by government national health bodies of the UK and Ireland, ~~thereby~~ supporting 99.7% occupancy rates and minimal tenant defaults or similar unplanned costs.		* 89% of rents are covered by government national health bodies of the UK and Ireland, supporting 99.7% occupancy rates and minimal tenant defaults or similar unplanned costs.
	* The lowest cost ratio (costs / rental income) in the whole of the UK REIT (real estate investment trust) space, with a EPRA (European Real Estate Association) cost ratio at 10.5%.		* The lowest cost ratio (costs / rental income) in the whole of the UK REIT (real estate investment trust) space, with a EPRA (European Real Estate Association) cost ratio at 10.5%.
	* 95% of group debt is hedged for almost eight years.		* 95% of group debt is hedged for almost eight years.
Line 195:		Line 197:
	* Headroom to continue growing the portfolio of health centres.		* Headroom to continue growing the portfolio of health centres.
	* An improving rental growth outlook, with rent reviews and asset management projects completed in the first half of this year adding £1.8m or 1.3% on a like-for-like basis.		* An improving rental growth outlook, with rent reviews and asset management projects completed in the first half of this year adding £1.8m or 1.3% on a like-for-like basis.

94.119.64.10 at 12:26, 13 December 2022

2022-12-13T12:26:13Z

Show changes

94.119.64.54 at 11:18, 13 December 2022

2022-12-13T11:18:37Z

← Older revision		Revision as of 12:18, 13 December 2022
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	== Succession Planning ==		== Succession Planning ==
	On 12th December 2022, the company announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which, based on the dates of the company's last five AGMs, we estimate will take place between 1st April 2024 and 11th June 2024~~, and on a Wednesday~~.		On 12th December 2022, the company announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which, based on the dates of the company's last five AGMs, we estimate will take place between 1st April 2024 and 11th June 2024. The company previously indicated that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.

	The company previously indicated that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.

	The search for the next CEO is being led by the company's chairman and non-executive director Steven Owen. To help maintain the independence of a non-executive director position, the position is normally served by someone for a maximum nine years. For Mr. Owen, the nine years will elapse in January 2023; however, to ensure a smooth transition of the CEO position, he will remain as the chairman until the new CEO appointment, subject to shareholder approval. Also, he will remain a member of the Nomination Committee and ESG Committee until the appointment, and cease to be a member of the Remuneration Committee from 31<sup>st</sup> December 2022.
	~~{\| class="wikitable"~~
	~~\|+The dates of the company's last five AGMs~~
	!#
	~~!Date~~
	~~!Day of the week~~
	\|-
	\|1
	~~\|27th April 2022~~
	~~\|Wednesday~~
	\|-
	\|2
	~~\|12th May 2021~~
	~~\|Wednesday~~
	\|-
	\|3
	~~\|1st April 2020~~
	~~\|Wednesday~~
	\|-
	\|4
	~~\|11th June 2019~~
	~~\|Tuesday~~
	\|-
	\|5
	~~\|18th April 2018~~
	~~\|Wednesday~~
	\|}
	== Financials ==		== Financials ==

Line 103:		Line 73:
	\|Beta		\|Beta
	\|0.531		\|0.531
	\|Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice.		\|Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta; because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.
	\|-		\|-
	\|Equity risk premium (%)		\|Equity risk premium (%)
	\|5.26		\|6.00
	\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<nowiki>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</nowiki>).		\|Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022 (<nowiki>https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html</nowiki>).
	\|-		\|-
	\|Cost of equity (%)		\|Cost of equity (%)
	\|6.34%		\|6.74%
	\|Cost of equity = Risk-free rate + Beta x Equity risk premium.		\|Cost of equity = Risk-free rate + Beta x Equity risk premium.
	\|}		\|}
Line 146:		Line 116:

	== Appendix ==		== Appendix ==

			=== Peers ===
	{\| class="wikitable"		{\| class="wikitable"
	\|+Peers		\|+Peers
Line 211:		Line 183:
	\|22%		\|22%
	\|}		\|}

			=== Other information ===

	== References and notes ==		== References and notes ==

155.198.14.141 at 18:07, 12 December 2022

2022-12-12T18:07:41Z

← Older revision		Revision as of 19:07, 12 December 2022
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	\|Which valuation model do you want to use?		\|Which valuation model do you want to use?
	\|Discounted cash flow		\|Discounted cash flow
	\|~~A discounted cash flow (DCF) model applied~~ to ~~equity valuation derives~~ the value of ~~common stock as~~ the ~~present or discounted value of its expected future cash flows~~.		\|Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the absolute valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.
	\|-		\|-
	\|Which type of discounted cash flow model do you want to use?		\|Which type of discounted cash flow model do you want to use?
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	\|What is the expected constant growth rate in dividends?		\|What is the expected constant growth rate in dividends?
	\|3%		\|3%
	\|We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom.		\|We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom. We expect the growth rate to be much higher that the global economy growth rate, but being conservative, we have assumed the 3%.
	\|-		\|-
	\|Which forecasts to use for the one-year ahead expected dividend amount?		\|Which forecasts to use for the one-year ahead expected dividend amount?
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	# The dividend per share forecast (the default forecast is 6.69 pence per share).		# The dividend per share forecast (the default forecast is 6.69 pence per share).

	The impact of a 20% change in those main inputs to the expected return of the Primary Health Properties Plc investment is shown in the table below.		The impact of a 30% change in those main inputs to the expected return of the Primary Health Properties Plc investment is shown in the table below.
	{\| class="wikitable sortable"		{\| class="wikitable sortable"
	\|+Primary Health Properties investment expected return sensitive analysis		\|+Primary Health Properties investment expected return sensitive analysis
Line 130:		Line 130:
	\|-		\|-
	\|Discount rate		\|Discount rate
	\|43%		\|4%
	\|57%		\|58%
	\|73%		\|233%
			\|-
			\|Dividend per share
			\|11%
			\|58%
			\|106%
	\|-		\|-
	\|Growth rate		\|Growth rate
	\|		\|28%
	\|		\|58%
	\|		\|106%
	\|-
	~~\|Dividend per share~~
	~~\|43~~%
	\|57%
	\|73%
	\|}		\|}

Line 159:		Line 159:
	\|Primary Health Properties PLC		\|Primary Health Properties PLC
	\|PHP LN		\|PHP LN
	\|		\|United Kingdom
	\|1,459m		\|1,459m
	\|0.168		\|0.168
Line 168:		Line 168:
	\|Assura PLC		\|Assura PLC
	\|AGR LN		\|AGR LN
	\|		\|United Kingdom
	\|1,578m		\|1,578m
	\| --		\| --
Line 177:		Line 177:
	\|Aedifica SA		\|Aedifica SA
	\|AED BB		\|AED BB
	\|		\|Belgium
	\|2,660m		\|2,660m
	\|14.8279		\|14.8279
Line 186:		Line 186:
	\|Target Healthcare REIT PLC		\|Target Healthcare REIT PLC
	\|THRL LN		\|THRL LN
	\|		\|United Kingdom
	\|477m		\|477m
	\| --		\| --
Line 195:		Line 195:
	\|Cofinimmo SA		\|Cofinimmo SA
	\|COFB BB		\|COFB BB
	\|		\|Belgium
	\|2,340m		\|2,340m
	\|11.3873		\|11.3873
Line 204:		Line 204:
	\|Impact Healthcare Reit PLC		\|Impact Healthcare Reit PLC
	\|IHR LN		\|IHR LN
	\|		\|United Kingdom
	\|404m		\|404m
	\|0.1111		\|0.1111

155.198.14.141 at 17:01, 12 December 2022

2022-12-12T17:01:40Z

Show changes

155.198.14.141 at 16:16, 12 December 2022

2022-12-12T16:16:50Z

Show changes

155.198.14.141 at 13:51, 12 December 2022

2022-12-12T13:51:47Z

← Older revision		Revision as of 14:51, 12 December 2022
Line 4:		Line 4:
	* The company previously indicated/announced that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.		* The company previously indicated/announced that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.
	* Accordingly, we have maintained our forecasts, and estimate that the expected return of an investment in Primary Health Properties over the next 12-months is ccc%. In other words, an £100,000 investment in the company is expected to return £ccc in 12-months time.		* Accordingly, we have maintained our forecasts, and estimate that the expected return of an investment in Primary Health Properties over the next 12-months is ccc%. In other words, an £100,000 investment in the company is expected to return £ccc in 12-months time.
	* We note that the degree of risk associated with an investment in Primary Health Properties is relatively 'high', with the company's shares having an adjusted beta that is 47% below the market (0.531 vs. 1).		* We note that the degree of risk associated with an investment in Primary Health Properties is relatively 'high', with the company's shares having an adjusted beta<ref name=":0">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Sirius's adjusted beta (5 years, monthly data) is 1.06, and is, accordingly, 6% above the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (1.6%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref> that is 47% below the market (0.531 vs. 1).
	* All-in-all, assuming that a suitable return level in the next 12 months is 10% or more, then an investment in the company is considered to be a 'suitable' one.		* All-in-all, assuming that a suitable return level in the next 12 months is 10% or more, then an investment in the company is considered to be a 'suitable' one.

155.198.14.141 at 13:44, 12 December 2022

2022-12-12T13:44:58Z

@@ Line 1: / Line 1: @@
 == Summary ==
 == Succession Planning ==
@@ Line 7: / Line 13: @@
 The search for the next CEO is being led by the company's chairman and non-executive director Steven Owen. To help maintain the independence of a non-executive director position, the position is normally served by someone for a maximum nine years. For Mr. Owen, the nine years will elapse in January 2023; however, to ensure a smooth transition of the CEO position, he will remain as the chairman until the new CEO appointment, subject to shareholder approval. Also, he will remain a member of the Nomination Committee and ESG Committee until the appointment, and cease to be a member of the Remuneration Committee from 31<sup>st</sup> December 2022.
 {| class="wikitable"
 |+The dates of the company's last five AGMs
@@ Line 36: / Line 39: @@
 |Wednesday
 |}
 == Financials ==
@@ Line 64: / Line 51: @@
 ==== What's the expected return of an investment in Primary Health Properties using the relative valuation approach? ====
-Accordingly, we estimate that the expected return of an investment in Primary Health Properties Plc over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 within 12-months from now. The assumptions used to estimate the return figure can be found in the table below.
+Accordingly, we estimate that the expected return of an investment in Primary Health Properties Plc over the next 12-months is ccc%. In other words, an £100,000 investment in the company is expected to return £ccc within 12-months from now. The assumptions used to estimate the return figure can be found in the table below.
-Assuming that a suitable return level in the 12 months is 10% and Primary Health Properties Plc achieves its expected return level (of 57%), then an investment in the company is considered to be a 'suitable' one.
+Assuming that a suitable return level in the 12 months is 10% and Primary Health Properties Plc achieves its expected return level (of ccc%), then an investment in the company is considered to be a 'suitable' one.
 ==== What are the assumptions used to estimate the return figure? ====
@@ Line 206: / Line 193: @@
 == Appendix ==

155.198.14.141: Created page with "== Summary == == Succession Planning == On 12th December 2022, the company announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which, based on the dates of the company's last five AGMs, we estimate will take place between 1st April 2024 and 11th June 2024, and on a Wednesday. The company previously indicated/announced that Mr. Hyman will step down around that time, so th..."

2022-12-12T13:20:20Z

Created page with "== Summary == == Succession Planning == On 12th December 2022, the company announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which, based on the dates of the company's last five AGMs, we estimate will take place between 1st April 2024 and 11th June 2024, and on a Wednesday. The company previously indicated/announced that Mr. Hyman will step down around that time, so th..."

New page

== Summary ==

== Succession Planning ==
On 12th December 2022, the company announced that Harry Hyman will officially step down as the company's chief executive officer (CEO) at the company's 2024 annual general meeting (AGM), which, based on the dates of the company's last five AGMs, we estimate will take place between 1st April 2024 and 11th June 2024, and on a Wednesday.

The company previously indicated/announced that Mr. Hyman will step down around that time, so the announcement is in-line with the market expectations.

The search for the next CEO is being led by the company's chairman and non-executive director Steven Owen. To help maintain the independence of a non-executive director position, the position is normally served by someone for a maximum nine years. For Mr. Owen, the nine years will elapse in January 2023; however, to ensure a smooth transition of the CEO position, he will remain as the chairman until the new CEO appointment, subject to shareholder approval. Also, he will remain a member of the Nomination Committee and ESG Committee until the appointment, and cease to be a member of the Remuneration Committee from 31<sup>st</sup> December 2022.

{| class="wikitable"
|+The dates of the company's last five AGMs
!#
!Date
!Day of the week
|-
|1
|27th April 2022
|Wednesday
|-
|2
|12th May 2021
|Wednesday
|-
|3
|1st April 2020
|Wednesday
|-
|4
|11th June 2019
|Tuesday
|-
|5
|18th April 2018
|Wednesday
|}

, in the last five years,

is scheduled to take place

its Chief Executive Officer will step down

Harry Hyman, Chief Executive Officer ("CEO"), has expressed his intention to retire as Chief Executive Officer of PHP at its annual general meeting in 2024 ("2024 AGM").

== Value Creation Award Win ==

== Financials ==

== Risks ==
As with any investment, investing in Primary Health Properties carries a level of risk. Overall, based on the company's market beta (i.e. 0.531), the degree of risk associated with an investment in Primary Health Properties is relatively 'high'. Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice.

For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inﬂation and interest rates movements.

== Valuation ==
Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or less, the approach that is more accurate is the relative valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.

==== What's the expected return of an investment in Primary Health Properties using the relative valuation approach? ====
Accordingly, we estimate that the expected return of an investment in Primary Health Properties Plc over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 within 12-months from now. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level in the 12 months is 10% and Primary Health Properties Plc achieves its expected return level (of 57%), then an investment in the company is considered to be a 'suitable' one.

==== What are the assumptions used to estimate the return figure? ====
{| class="wikitable"
|+Key inputs
!Description
!Value
!Commentary
|-
|Which type of multiple do you want to use?
|P/FFO
|The FFO does not account for depreciation in properties but rather adds back the depreciation value back to the net income. Furthmore, FFO deducts any gains or losses from the sale of assets, since including the transaction would result in discrepancies in the revenues reported in each period. Accordingly, we suggest valuing the company using the Price to Funds From Operations (P/FFO) ratio.
|-
|In regards to the P/FFO multiple, for the FFO figure, which year to you want to use?
|Twelve months ahead
|Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the FFO figure, we suggest using the twelve months ahead.
|-
|In regards to the P/FFO multiple, what multiple figure do you want to use?
|18x
|According to Bloomberg, Primary Health Properties Plc closest peers trade on a multiple of 18x.
|-
|Which financial forecasts to use?
|Proactive Investors
|Here, we have used the forecasts of Proactive Investors.
|-
|What's the current value of the company?
|£981.20 million
|As at 22nd November 2022, the current value of Primary Health Properties Plc is £981.20 million.
|-
|Which time period do you want to use to estimate the expected return?
|Between now and one year time
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.
|}
Health Care REIT
{| class="wikitable"
|+Peers
!Company name
!Bloomberg ticker
!Primary exchange
!Classification
!Industry
!Market capitalisation (GBP)
!BF P/FFO
!Yield (%)
!Interest cover (x)
!Total debt/total capital
|-
|Primary Health Properties PLC
|PHP LN
|
|
|
|1,459m
|0.168
|5.95%
|N/A
|46%
|-
|Assura PLC
|AGR LN
|
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|1,578m
| --
|5.77%
|3.77
|41%
|-
|Aedifica SA
|AED BB
|
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|2,660m
|14.8279
|4.75%
|5.91
|43%
|-
|Target Healthcare REIT PLC
|THRL LN
|
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|477m
| --
|8.78%
|8.35
|25%
|-
|Cofinimmo SA
|COFB BB
|
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|2,340m
|11.3873
|7.12%
|7.80
|44%
|-
|Impact Healthcare Reit PLC
|IHR LN
|
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|404m
|0.1111
|6.51%
|N/A
|22%
|}

== Sensitive analysis ==
The two main inputs that result in the greatest change in the expected return of the Primary Health Properties Plc investment are, in order of importance (from highest to lowest):

# The P/FFO multiple (the default multiple is 18x); and
# The twelve months ahead FFO forecast (the default forecast is €98.78 million).

The impact of a 10% change in those main inputs to the expected return of the Primary Health Properties Plc investment is shown in the table below.
{| class="wikitable sortable"
|+Primary Health Properties investment expected return sensitive analysis
!Main input
!10% worse
!Unchanged
!10% better
|-
|The P/FFO multiple
|43%
|57%
|73%
|-
|The twelve months ahead FFO forecast
|43%
|57%
|73%
|}

== Appendix ==