Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• HealthCo Healthcare and Wellness REIT (ASX:HCW) delivered a 5% earnings growth compared to the first half of FY24.
• The company achieved 100% cash rent collection, indicating strong operational performance.
• HealthCo's portfolio is diversified across hospitals, primary and specialty care, aged care, and government and life sciences, providing income growth and security.
• The company has a strong balance sheet with gearing at 32.4%, which is at the lower end of their target range.
• HealthCo reaffirmed its guidance for FY25, with FFO per unit of $0.08 and DPU of $0.08, demonstrating confidence in future performance.

Negative Points

• There is increased market speculation and unit price volatility surrounding Healthscope, which represents 59% of HCW's income.
• The company faces challenges with Healthscope's capital structure, which needs rectification despite operational performance being strong.
• HealthCo sold childcare assets at a 5% discount to book value, indicating potential challenges in achieving desired asset sale prices.
• The company is managing development rollouts cautiously due to the current market situation, which may impact growth opportunities.
• Concerns were raised about potential conflicts of interest if HMC Capital's consortium, which includes HCW, were to acquire Healthscope.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with ASX:HCW.

Q: Can you provide more details on the critical dates related to Healthscope and its implications for HCW? A: We have provided all the information we are prepared to share at this moment. The situation with Healthscope will need to be resolved sooner rather than later. - Sid Sharma, HMC Capital Managing Director, Real Estate.

Q: What was the pricing achieved for the $47 million worth of childcare assets sold, and when did these disposals occur? A: We sold these assets at around a 5% discount to book value, with an average yield just shy of 5.5%. All sales were completed in the first half of the year. - Christian, Portfolio Overview Presenter.

Q: Could you elaborate on the pressures affecting Healthscope's profitability and the drivers behind it? A: The pressures are mainly due to private health insurance and wage costs. However, Healthscope's volumes are up, VMO retention is high, and operational performance is strong. The main issue is the capital structure. - Sid Sharma, HMC Capital Managing Director, Real Estate.

Q: How does the buyback program align with your stock's trading relative to NTA, and do you plan to increase its pace? A: We had to pause the buyback during the blackout period. We will monitor the situation and consider recommencing if it makes sense from a unit price perspective. - Sid Sharma, HMC Capital Managing Director, Real Estate.

Q: Are Healthscope's current rents sustainable, and how confident are you in re-tenanting if necessary? A: The rents were independently valued and adjusted down by about 10% at acquisition. We believe the current rents are sustainable, and the issue lies with Healthscope's capital structure. We will act in the best interests of HCW unit holders. - Sid Sharma, HMC Capital Managing Director, Real Estate.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.