SINGAPORE (June 14): CGS-CIMB Securities continues to rate RHT Health Trust a “hold”, but has lowered its target price on the group to 81 cents following its weak FY18 results, which was attributed to weakness of the INR to SGD.
In a Wednesday report, analyst Lock Mun Yee says, “Recent weakness of the Indian rupee against the Singapore dollar to have negative impact on the settlement value of proposed disposal of assets.”
Meanwhile, the execution of the master purchase agreement with Fortis Healthcare for the disposal of the entire asset portfolio of RHT Health Trust is still ongoing, subject to unitholders approval at an EGM, with a long stop date on Sept 30.
See: RHT Health Trust signs master agreement to sell $957 mil asset portfolio to Fortis Healthcare
The final consideration for the trust’s asset portfolio was INR 46 billion, which in SGD is worth today at $909 million, compared to $957 million in Feb 13, when the trust signed the master lease agreement. The INR has since depreciated by 4.1%.
“Our sensitivity analysis shows that for every 1% depreciation in the rupee, the settlement value/unit would dip by 1.3- 1.4%,” says Lock.
On the other hand, the analyst notes the trust’s completion of the 217 new bed capacity from Ludhiana, Nagarbhavi and Amritsar clinical establishments, as well as the completion of the operating theatre at BG Road, Bengaluru, have been put on hold.
Hence, Lock assumes that the rollout these additional capacities would be delayed by one or two years. These have been factored into the earnings projection.
The group recorded a FY18 DPU of 4.51 cents, 8.7% lower compared to FY17 DPU of 4.97 cents, due to higher interest expense and increased one-off expenses from refinancing and bondholders consent solicitation exercise.
See: RHT Health Trust posts 5.4% lower 4Q DPU of 1.06 cents on higher borrowings & expenses
On its outstanding distributions for FY18, the trustee-manager indicated that the 4Q outstanding amounts of 2.15 cents may be considered for distribution to unitholders, given that Fortis has provided an undertaking to settle these amounts by June 20.
“Going into FY19, any future distributions would continue to accrue up to the date of completion for the transaction,” adds Lock.
Overall, as the analyst factors in the trust’s delays in the new bed capacity coming onstream and assumes a lower INR/SGD assumption of 50, her FY19/20 DPU estimates has been lowered by 10.0%/8.5%.
Furthermore, the trustee-manager also indicated it has not and will not enter into any hedge for its rupee cash flow over the six months ending Dec 2018 and for future periods, considering the proposed disposal.
As at 1.04pm, units in RHT Health Trust are trading at 76 cents or 0.99 times FY19 book with a dividend yield of 6.59%.
