Religare Health Trust - DBS Research 2016-05-26: Fairly priced

Religare Health Trust - DBS Research 2016-05-26: Fairly priced RELIGARE HEALTH TRUST RF1U.SI 

Religare Health Trust - Fairly priced

  • 4Q16 DPU grew 0.5% y-o-y, in line
  • Average revenue per operating bed rose 5% while occupancy fell
  • Distribution payout reduced to 95% (100% previously) from FY2017 onwards
  • Proposed disposal still pending approval.

Strong outlook priced in. 

  • We maintain our HOLD recommendation but lower our TP to S$0.95. 
  • 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 are largely 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 
    1. ongoing development projects at BG Road and Ludhiana will add another 279 beds (investment value of S$48.2m) by FY17, and 
    2. 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 18% as at end-Mar16 This is among the lowest in the S-REIT/property business trust space. This allows RHT to easily support its expansion plans and/or pursue accretive acquisitions.


  • We lower our DDM-based TP of S$0.97 to S$0.95 to factor in a lower dividend payout and trimmed our FY17F to FY18F DPU by 4% to 5%
  • 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 acquisition. 

Rachel Lih Rui Tan DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-05-26
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 0.95 Down 0.97