With Brexit-fearing investors not apparently in the mood for growth shares at the moment, I’m seeing FTSE 250 member Assura Group (LSE: AGR) as an overlooked opportunity.
The company’s in the healthcare sector, as a primary care property investor and developer, and I can only see that sector expanding over the next few decades. Assura’s earnings have been picking up over the past couple of years too, with forecasts suggesting continuing growth.
On top of that, we’ve also been seeing a nicely progressive dividend, currently forecast to deliver a 4.9% yield this year, rising to 5.3% by 2021.
Tuesday’s third-quarter update revealed the acquisition of eight more medical centres for a total cost of £67m, taking the company’s investments in the year to £175m. Its portfolio now stands at 533 medical centres, with a total annualised rent roll of £99.8m.
That to me suggests good visibility of future earnings, and that can be a key for supporting sustainable dividends. Unlikely to need as much cover as companies with less stable income, Assura has a policy “to provide a secure, fully covered and growing dividend stream,” and has lifted its quarterly dividend by 5%.
What we’re seeing are strong yields, with progressive rises going significantly ahead of inflation.
As an additional attraction, allied to our increasingly ageing population, I see Assura still having plenty of growth to come. And I don’t see a two-year-out P/E of 17.5 as being unduly stretching.
Assura shares have followed the FTSE 250 down over the past 12 months, and I think that’s an investing mistake. Good growth and rising dividends are what I see, at a fair price.
In the current climate the firm is, understandably, experiencing trading that’s a bit tough. But it says its banking division has performed well over the five months to December, with its loan book growing to £7.5bn — driven by commercial business and premium finance. We’re not looking at high-risk lending here.
The company saw net inflows into its asset management arm, though a falling market led to an overall 3% drop in the value of managed assets, from £10.4bn in July, to £10.1bn.
Its Winterflood arm has performed less well, as volumes and trading have been hit by “volatile equity market conditions, particularly in December,” but it’s still expected to “deliver solid profitability.”
First-half results should be with us on 12 March, and it seems to me that Close Brothers is set for a pretty decent 2019. Tuesday’s update said that “we expect a solid outcome for the first half, and remain well positioned for the remainder of the financial year.”
On the valuation front, we’re looking at shares priced for P/E multiples of around 11 for this year and next, and expected to provide dividend yields of 4.2% and 4.4%, respectively. That’s after the shares have gained 5% over the past 12 months, while the FTSE 250 has dropped 9% overall.
While we’re looking at a valuation that’s higher than our retail banks, I see it as undemanding and I expect more to come in 2019.