Religare Health Trust:
1QFY14 results in line
Price Target : 12-Month S$ 0.99 (Prev S$ 1.05)
•1QFY14 DPU within our expectation; topline improved q-o-q
•Forex exposure hedged till end FY14, looking to hedge up to 1H15
•Maintain BUY, nudged down TP to S$0.99
1Q DPU of 2.0 Scts in line. The annualised DPU is 2.5% below its IPO forecast mainly due to higher operating expenses (namely higher depreciation charge) and forex losses. However, management remains confident that it will achieve its projections for FY14 as disclosed in its prospectus.
Operations improved q-o-q. Topline inched up 1% q-o-q and distributable income grew 5.6% to S$11.4m. This was driven by stronger hospital income, and higher average revenue per operating bed, which rose 9.7% to S$225k (excluding Gurgaon) in the quarter.
Factoring in weaker INR in FY15. We revised the SGD/INR rate for FY15F and beyond to SGD/INR 49) following recent weakness in the INR. We estimate a 1% change in the forex rate would change DPU by 1%; a stronger INR will be a positive catalyst for RHT, and vice versa.
Offering attractive 9.3% yield at current price. It has hedged its distributions till FY14 at an average rate of INR47.28/SGD. Management intends to continue with its policy to enter into forward hedges for the next three distributions (i.e. till 1H15). Going forward, we expect management to deliver inorganic growth by leveraging on its low gearing. Coupled with growth from its existing operations and brown/ greenfield expansion as they progressively comes onstream, these will enhance DPU.
Maintain BUY, TP revised to S$0.99. Our DDM-backed TP is adjusted down marginally after we factored in a weaker INR vs SGD. Key risks to our recommendation is further weakness in the INR.
Publish date: 14/08/13