Religare Health Trust eyes S$100m assets acquisition

It's exploring Fortis-operated properties.

According to CIMB, Religare Health Trust's management is evaluating three potential assets (estimated value of S$100m) for acquisition. Assets under consideration are those which are operated by Fortis but owned by third parties. As for underlying assets, revenue growth for its seven largest assets was 7-55% yoy in FY3/13.

Here's more:

What Happened
CEO, Mr Gurpreet Dhillon, and CFO, Mr Pawanpreet, participated in our recent annual Asia-Pacific Conference. As RHT was just listed last year, its
meetings were mainly introductory. Discussions centred on: 1) forex fluctuations / hedges; 2) acquisitions; and 3) growth of its underlying assets.

Management says the trust’s forex exposure has been fully hedged till Mar 15 with a policy of hedging distributions for the next 12 months on a rolling basis.

What We Think. RHT offers a combination of stability through its fixed base fees (that are  growing 3% p.a.) and growth through variable fees tied to the revenue growth of its underlying assets. The latter should come from capacity expansion and ARPOB increases for underlying assets.

Meanwhile, RHT’s low asset leverage should provide debt headroom for acquisition growth; while parent/sponsor’s deleveraging efforts should instil some confidence.

What You Should Do. Share price has corrected alongside a weakening Indian rupee and the broad-based selldown of SREITs and other yield instruments in the wake bond yield spikes.

Maintain Outperform, nonetheless, as we believe attractive headline yields of 9-10% have priced in some risks. We see re-rating catalysts from earnings deliveries and acquisitions.