Primary Health Properties (LSE:PHP) develops new healthcare facilities and rents them to GPs, chemists, and healthcare providers. It has cornered a thriving market with long leases and little reason to think its tenants might want to leave. Its share price has soared in recent years, but the delivery of healthcare is being upended by telemedicine. Does this have the potential to eradicate the need for surgeries?
Virtual diagnosis
Virtual doctors’ appointments have taken on a life of their own since lockdown. The ability to book an appointment online and carry it out via video call is simple and increasingly appealing. It means you no longer have to endure a journey, parking, risk of infection or a long wait in the doctor’s surgery. Plus, you get a review of the session sent to you as the appointment ends. From the GP’s point of view, they can see more patients, are at less risk of exposure to bugs and can reallocate cancelled slots more easily than no-shows in a real-world setting. The efficiency of the virtual environment could make a sizeable difference in seeing more people sooner. But sometimes, a doctor will need to examine patients in a real-life setting.
Share price fluctuations
I imagine healthcare staff will have to continue operating from surgeries to protect patient’s records and privacy, so I do not think telemedicine is an imminent threat to the future of GP surgeries. It does not appear to be something Primary Health Properties is worrying about either. In fact, the coronavirus crisis may increase demand for purpose-built healthcare facilities. In its half-year results this week, it announced a £120m share placing to fund further acquisitions and growth.
Primary Health Properties operates as a real estate investment trust (REIT), which means it must share its profits among stockholders. This has made it a lucrative investment in recent years with a rising dividend yield (currently 3.7%). Its share price fell in response to the placing, but has risen 18% since the 2020 stock market crash.
For now, I don’t think telemedicine will adversely affect the PHP share price. I think it is a less risky investment than many other property stocks and I would consider adding it to an income portfolio.
Investing in telemedicine
Telemedicine is relatively new and mainly provided by US companies or private UK companies. However, there is an AIM-listed venture capital firm called Draper Esprit (LSE:GROW) that invests in this area. Valued at around £566m, it has a price-to-earnings ratio of 14, and earnings per share are 33p.
Draper Esprit’s portfolio includes technology companies focused on long-term growth in areas of artificial intelligence, cloud computing and digital health. This includes Push Doctor, which works with the NHS to provide GP video services; MediDate affordably connects its patients with leading surgeons; while Ieso Digital Health provides mental health and therapy support remotely.
The Draper Esprit share price has had a rocky five years. Since the March stock market crash, it has risen 78%, but is still 20% lower than its highest share price this year. I think it looks like an interesting investment opportunity, particularly if you want to invest in new areas of tech and healthcare. But bear in mind, it is a high-risk stock.
