What happened to the Generation Healthcare share price?
Over the last month-and-a-half, shares in Generation Healthcare [ASX:GHC] — the ASX’s only pure play healthcare REIT — have gained close to 16%. That’s not something you expect to see from a small-cap REIT.
Why did Generation Healthcare shares do this?
Shareholders in Generation have enjoyed a meteoric rise in the share price since listing at 70 cents in 2011. Along with a stream of ever-rising dividends, the share price has tripled over the same period.
Buoyed by growing demand for healthcare services, the majority of Generation’s assets are leased out on long term agreements, with annual rental increases as part of the deal. Take the Epworth Freemason’s Private Hospital as an example, where the current lease runs until 2034.
With large fund managers chasing exposure to this sector, available healthcare assets are thin on the ground. Rival Australian Unity upped its stake in Generation to over 10% late last year, and new shareholder — Canadian healthcare investor NorthWest Healthcare — recently emerged with a 7% stake, sending Generation’s shares soaring.
What now for Generation Healthcare?
With four shareholders now controlling over 40% of all issued shares, there is plenty of speculation about potential corporate plays. With little joy in bonds, more yield-based funds are finding their way into the REIT market, and rumours of mergers abound.
But while the share price has had a run, potential investors need to be cautious. The chase for scrip now sees Generation’s yield trading below 4%. There are plenty of other REITs paying out a lot more than this. Those looking to buy might need to be patient, and wait for a pullback from the current price.