RHT Health Trust (RHT SP) - DBS Research 2017-11-16: Buyout Offer From Fortis Healthcare

RHT Health Trust (RHT SP) - DBS Vickers 2017-11-16: Buyout Offer From Fortis Healthcare RHT HEALTH TRUST RF1U.SI

RHT Health Trust (RHT SP) - Buyout Offer From Fortis Healthcare

  • Fortis Healthcare offers to buy out all RHT Health Trust’s assets for S$0.90 per share. 
  • Offer price is at an 11% premium to yesterday’s closing price, implies P/NAV of 1.07x 60-day exclusivity period to negotiate. 
  • Note that 1H18 distribution has not been declared. 



What’s New 


Fortis Healthcare offers to buy out RHT’s assets 

  • RHT Health Trust received a proposed offer from Fortis Healthcare to buy out all RHT’s assets for INR46,500m or INR34,980m net of debt which translates to S$0.90 per share (at exchange rate of INR48.11 to S$1 ). This is at an 11% premium to yesterday’s closing price, and implies P/NAV of 1.07x. There is a 60-day exclusivity period to negotiate.
  • We believe the price is fair based on the implied valuation. In addition, we note that the 1H18 distribution has not been declared.
  • In addition, according to Fortis’ announcement, the proposed transaction would be funded with a combination of equity, quasi-equity and/or debt. Fortis has an enabling resolution in place to raise capital for up to INR50bn and has been in active dialogue with financial/strategic investors to raise funds. 

Could there be a new strategic investor, investing in Fortis Healthcare with the similar structure like Religare Enterprise? 

  • Economic Times reported yesterday that the promoters are in talks with overseas financial investors and plans to “sell” its stake via the issuance of fresh shares.
  • However, according to the latest Bloomberg news, a Religare spokesman said the two announcements aren’t related, while a Fortis spokesman declined to comment.

2Q18 results below expectations due to higher expenses 

  • RHT’s 2Q18 DPU fell 37% y-o-y to 1.14 Scts mainly due to the loss in income contribution from the sale of its 51% interest in FHTL (Gurgaon and Shalimar Bagh Clinical Establishments). 
  • Following the sale, RHT declared and paid a special dividend of 24.8 Scts in October 2016. On a comparable basis, 2Q18 DPU fell 15% y-o-y mainly due to non-recurring other trust expenses in connection with the refinancing activities and one-off consent exercise, higher finance cost and higher tax expense by an associate.
  • Net property income (NPI) in 2Q18 increased 6% y-o-y to S$11m, largely due to a 4% y-o-y revenue growth led by the contractual 3% increase in base fee, offset by a slightly lower variable fee.




Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-11-16
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 0.850 Same 0.850



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