SINGAPORE (May 24): DBS Vickers is maintaining its “hold” rating and target price of 85 cents on RHT Health Trust.
While DBS is positive on RHT’s expansion plans in the long term and exposure to the growing demand for healthcare services in India, the broker believes the loss of income from the sale of Fortis Hospotel has yet to be fully priced in.
Still, media reports of a potential privatisation has kept RHT's share price above NAV.
To recap, RHT’s FY17 DPU -- excluding special dividend -- fell 23% y-o-y due to the disposal of its 51% interest in Fortis Hospotel. 4Q17 DPU fell 41% y-o-y to 1.12 cents due to the disposal.
On a comparable basis, 4Q17 DPU fell 19% y-o-y, largely impacted by demonetisation policy which affected hospital income and occupancy rate despite higher Average Revenue per operating bed (ARPOB). FY17 net service fee margins fell from 68% to 64% on cost pressures.
However, DBS says RHT has ample debt headroom of $325 million to support development initiatives. Its gearing is also among the lowest in the S-REIT/property business trust space.
This allows RHT to easily support its expansion plans and pursue accretive acquisitions including ongoing development projects at BG Road and Ludhiana and planned asset enhancement initiatives at various clinical establishments.
Units of RHT Health Trust are trading 1 cent lower at 91 cents.
