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5 reasons to buy this ASX healthcare share: Goldman Sachs

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If you’re interested in gaining some exposure to the healthcare sector, then Healthco Healthcare and Wellness REIT (ASX: HCW) shares could be for you.

That’s because the team at Goldman Sachs believes the healthcare property company’s shares have major upside potential.

What did Goldman say about this healthcare share?

Goldman is very bullish on Healthco Healthcare and Wellness REIT’s shares and has reiterated its conviction buy rating with a $2.20 price target.

So, with its shares currently changing hands at $1.66, this implies potential upside of 33% for investors over the next 12 months.

In addition, the broker is forecasting a 4.5% dividend yield in both FY 2022 and FY 2023. This lifts the total 12-month return to ~38%.

5 reasons Goldman is bullish

Goldman Sachs has named five reasons that it is bullish on the Healthco Healthcare and Wellness REIT share price.

These include the company’s strong balance sheet, robust demand for its properties, and the attractive valuation of its shares following a period of underperformance. The broker explained:

Year-to-date, HCW has underperformed the REIT index by ~7% as concerns over the macro environment and rising rates have impacted HCW’s share performance. However, the REIT remains one of our top picks in the sector given:

1) its net cash position with over $450mn of liquidity, providing flexibility for near term opportunities, 2) its diversified mix of strong tenant covenants in sub-sectors that are majority government-backed across the care spectrum, mitigating potential tenant credit risks, 3) Healthcare and childcare assets valuations have remained resilient, 4) the expansive forecast future demand for assets across the care spectrum, underpinning development opportunities, and 5) inexpensive valuation, trading below its IPO share price and an ~18% discount to NTA.

And while Goldman acknowledges that there are risks from higher capital costs, it believes the risk/reward on offer is compelling enough to support its conviction buy rating.

Whilst we acknowledge risks remain we believe the current valuation provides an attractive entry point. HCW offers a potential 12m total return of +c.39% at our revised 12-m A$2.20 TP. We maintain our Buy (on CL) rating.

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