RELIGARE HEALTH TRUST
RF1U.SI
Religare Health Trust - Fairly priced
- 3Q16 DPU +5%y-o-y; in line
- Distribution payout reduced to 95% (100% previously) from FY2017 onwards
- Proposed disposal of 51% economic interest in FHTL (owns Gurgaon and Shalimar Bagh Clinical Establisments)
- Estimated special DPS of S$0.254 post-disposal
Strong outlook is priced in.
- We maintain our HOLD recommendation with TP of S$0.97.
- While we are positive on Religare Health Trust (RHT)’s expansion plans and exposure to the growing demand for healthcare services in India, we believe these attractive attributes have largely been priced in.
- In addition, there may be pressure on DPU (excluding potential special dividends) from 2017 following management’s decision to reduce distribution payout.
Development and asset enhancement initiatives to drive future growth.
- Looking ahead, we expect RHT to continue to deliver decent organic growth on the back of a robust outlook in the Indian healthcare sector and steady increase in average revenue per operating bed (ARPOB).
- Inorganic initiatives include
- ongoing development projects at BG Road and Ludhiana will add another 279 beds (investment value of S$48.2m) by FY17, and
- planned asset enhancement initiatives at various clinical establishments, adding 292 beds (investment cost of c.S$20m) over FY16-17.
Low gearing.
- RHT has significant debt headroom, with gearing at only 15% as at end-Dec 2015. This is among the lowest in the S-REIT/property business trust space. This would allow RHT to easily support its expansion plans and/or pursue accretive acquisitions.
Valuation:
- We maintain our DDM-based TP of S$0.97.
- Given limited upside to our TP, we reiterate our HOLD recommendation.
Key Risks to Our View:
- The key risk to our neutral stance is stronger than expected earnings and/or INR.
- Additional upside could also arise from acquisitions.
Derek Tan
DBS Vickers
|
Mervin Song CFA
DBS Vickers
|
http://www.dbsvickers.com/
2016-02-05
DBS Vickers
SGX Stock
Analyst Report
0.97
Same
0.97
