RHT Health Trust - CIMB Research 2018-02-13: Executes Agreement On Proposed Asset Sale

RHT Health Trust - CIMB Research 2018-02-13: Executes Agreement On Proposed Asset Sale RHT HEALTH TRUST RF1U.SI

RHT Health Trust - Executes Agreement On Proposed Asset Sale

  • RHT has entered into a master purchase agreement with Fortis.
  • Final consideration revised slightly to Rs46bn.
  • Maintain HOLD with an unchanged DDM-based Target Price of S$0.92.

Enters into master purchase agreement

  • Following an initial announcement in Nov 2017, RHT said on 12 Feb 2018 that it had entered into a master purchase agreement with Fortis Healthcare Ltd (Fortis) in relation to the disposal of the entire asset portfolio of RHT Health Trust, which includes its interests in 12 clinical establishments, 4 greenfield clinical establishment and 2 operating hospitals in India, to Fortis. 
  • The deal is subject to unitholders’ approval at an EGM. The long stop date is on 30 Sep 2018.

Final consideration (before costs) works out to be S$0.88/unit

  • The net consideration (vs. the earlier-announced aggregate consideration of Rs46.5bn) works out to be S$710.6m (or S$0.88/unit) after taking into account
    1. the revised final consideration of Rs46bn (after a downwards adjustment of Rs500m due to parties not obtaining warranty and indemnity insurance),
    2. an exchange rate of Rs48.5 to the S$, and
    3. repayment of RHT’s external borrowings of S$237.9m.
  • The estimated consideration of S$0.88/unit represents a 10.3% premium over the adjusted BV of S$0.7975 and is at a 6.1% and 4.6% premium to the 1-month and 3- month VWAP, respectively. The net proceeds post settlement of transaction costs of c.S$15.8m (including a S$10.3m Trustee-Manager performance fee) works out to be S$0.86/unit.

Part of outstanding fees received

  • At the same time, the Trustee-Manager also updated that it has received a further Rs530m from Fortis towards the payment of outstanding fees for both 1HFY3/18 and 3QFY3/18. Hence, an aggregate of Rs670.7m accrued and due remains outstanding for 9MFY3/18.
  • The Trustee-Manager will consider the distribution of the remainder distributable income for 9MFY3/18 when it receives the remainder of service fees and interest income on the CCDs.

Retain HOLD rating

  • We leave our DPU estimates unchanged and maintain our HOLD rating pending further details on the transaction in the upcoming circular. 
  • Our DDM-based Target Price of S$0.92 is retained for now.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2018-02-13
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 0.920 Same 0.920