MedicX Fund

Investing in healthcare properties in the UK, with all its rents government-backed, MedicX Fund shares now yield a base rate-busting 9.4%.

The closed-ended Guernsey-based fund, which raised £80m at IPO in November 2006 and has secured £100m of debt, owns 45 NHS doctors’ surgeries and primary health trusts around the UK, having added seven during the year to September. The net asset value of the properties at the year-end has been independently valued at 70.3p per share, down from 96.9p a year before, though the discounted cash flow net asset value has only fallen from 109.9p to 107.3p.

With properties unlikely to have changed hands much, the fall in value – which is equivalent to a 13% decline in the value of its sites – seems a rough estimation, but is anyway less than half the 30% fall of the benchmark of the IPD all-property index. Also, with tenants being reliable and stable – no voids on its books and rents being revised upwards every three years – it looks excessive.

The fund presently enjoys a rent-roll of £9.6m, up 4.6% over the year, and its cash yield of 5.8% compares well with the 30-year rate of 5% under which it secured its debt. The board intends to pay a final dividend of 2.6p, for an annual dividend of 5.2p.

Chairman Keith Maddin, who is one of the two investment advisers to the fund, does not plan to free up much, if any, of his current £24m cash resource, preferring to raise funds in the new year to take advantage of a claimed £85m pipeline.

AIM has numerous similarly sized funds of this ilk, tapping this solid niche. MedicX looks as good as any and, like many others, deserves a higher rating. Buy.

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