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Target Healthcare REIT revenue growth accelerated to 29.1% in FY2020 vs. 20.8% a year earliner

06 Oct 2020 • About Target Healthcare REIT ($THRL) • By InTwits

Target Healthcare REIT reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • Target Healthcare REIT is a fast growth stock: FY2020 revenue growth was 29.1%, 5 year revenue CAGR was 26.4% at FY2020 ROIC 6.4%
  • Target Healthcare REIT has high CAPEX intensity: 5 year average CAPEX/Revenue was 247.9%. At the same time it's a lot of higher than industry average of 76.2%.
  • CAPEX is quite volatile: £118m in FY2020, £100m in FY2019, £90m in FY2018, £38m in FY2017, £35m in FY2016
  • The company has potentially unprofitable business model: ROIC is 6.4%
  • It operates with high leverage: Net Debt/EBITDA is 3.1x while industry average is 2.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Target Healthcare REIT's Revenue jumped on 29.1%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.2 pp from -4.0% to -2.9% in FY2020. During the last 5 years EBITDA Margin topped in FY2018 at 104% and was declining since that time.

Net Income margin dropped on 15.7 pp from 87.2% to 71.4% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 97.3% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2020 Target Healthcare REIT had CAPEX/Revenue of 265%. Target Healthcare REIT's CAPEX/Revenue jumped on 105 pp from 160% in FY2017 to 265% in FY2020. It's average level of CAPEX/Revenue for the last three years was 291%. The company has spent a lot to CAPEX (317% of EBITDA) to secure its growth.

Return on investment

The company operates at low ROIC (6.4%) and ROE (7.0%). ROIC decreased slightly on 0.64 pp from 7.0% to 6.4% in FY2020. ROE decreased slightly on 0.77 pp from 7.7% to 7.0% in FY2020. During FY2016-FY2020 ROIC topped in FY2018 at 8.2% and was declining since that time. During FY2016-FY2020 ROE topped in FY2018 at 9.0% and was declining since that time.

Financial and operational results

FY ended 30 Jun 2020

Target Healthcare REIT ($THRL) key annual financial indicators

mln. £201620172018201920202020/2019
Net Income11.70219.12227.60929.88431.6225.8%
Balance Sheet
Long Term Debt20.44939.33164.182106.420150.13541.1%
Cash flow
Revenue growth23.0%39.6%20.4%20.8%29.1%
EBITDA growth20.5%59.2%46.9%11.4%12.3%

EBITDA Margin75.0%85.5%104.4%96.2%83.7%-12.6%
Net Income Margin69.3%81.2%97.3%87.2%71.4%-15.7%
CAPEX, % of revenue206.4%160.0%317.2%290.6%265.4%-25.2%

Net Debt/EBITDA-3.5x1.4x0.8x2.4x3.1x0.7x

Peers in Equity Investment Instruments

Below we provide Target Healthcare REIT benchmarking against other companies in Equity Investment Instruments industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Gcp Student Living ($DIGS)-27.3%25.1%24.1%7.5%
Ground Rents Income Fund ($GRIO)-64.4%7.9%4.3%5.3%-
Ediston Ppty Inv Co ($EPIC)91.9%7.3%119.5%-21.9%-
Median (3 companies)3.8%7.9%14.7%5.3%7.5%
Target Healthcare REIT ($THRL)-39.6%20.4%20.8%29.1%

Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Gcp Student Living ($DIGS)79.5%78.7%77.8%78.9%79.8%
Median (1 company)72.4%76.4%77.8%78.9%79.8%

Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Gcp Student Living ($DIGS)242.3%683.2%203.1%149.1%86.6%
Ediston Ppty Inv Co ($EPIC)389.8%225.9%569.8%16.4%-
Ground Rents Income Fund ($GRIO)102.4%234.6%49.1%5.1%-
Median (3 companies)91.4%225.9%203.1%16.4%86.6%
Target Healthcare REIT ($THRL)206.4%160.0%317.2%290.6%265.4%

Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Gcp Student Living ($DIGS)10.1%4.8%9.1%11.5%5.8%
Ediston Ppty Inv Co ($EPIC)5.1%7.3%8.3%5.0%-
Ground Rents Income Fund ($GRIO)---7.1%-1.2%-
Median (3 companies)9.6%10.6%8.3%5.0%5.8%
Target Healthcare REIT ($THRL)5.7%7.1%8.2%7.0%6.4%