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Religare Health Trust: 8.5 to 9% yield.

Tuesday, September 11, 2012

A new business trust to be listed soon in Singapore, it seems.

Religare Health Trust, which will own assets managed by Indian hospital group Fortis, is offering an indicative yield of 8.5% to 9% for its initial public offering that could raise as much as $500 million. The units offered will comprise about 70% of the total, the source added.

The listing is planned in the third week of October, sources said.

Religare Health Trust has a mandate to invest in medical and healthcare assets and services in Asia, Australasia and emerging markets, Fortis Healthcare has said previously.


Fortis Healthcare is controlled by billionaire brothers
Malvinder and Shivinder Mohan Singh.

The distribution yield is tempting, for sure. However, I wonder what is the debt level going to be like. After all, it was reported in August that Fortis Healthcare, the sponsor of the trust, has a very heavy debt burden.

Religare Health Trust is set to launch an up to US$400 million ($498 million) initial public offering in Singapore, a source said, in a move that will allow the backer of the trust, Indian hospitals group Fortis Healthcare, to cut its substantial debt level.

Fortis is India’s No. 2 hospitals operator after Apollo Hospitals Enterprise. It had consolidated net debt of 62.37 billion Indian rupees ($1.39 billion) as of end-June.


Details are lacking at the moment. What is the gearing level going to be like, pro forma? What is the NAV/unit? Apart from hospitals in India, where and what are the other assets to be held by the trust? Are the assets of good quality?

Apart from watching some documentaries and news coverage on the country, India is a country I barely know. This is also only the second listing in Singapore by an Indian company. Some of us might remember that in 2009, there was Indiabulls Properties Investment Trust.

To trust or not to trust? I will need more information.


goldmansion said...

Hi AK,
I am wary of Business Trust. Most of the trusts are still trading below their IPOs price.Examples are:
1. cityspring
2. FSL trust
3. Indiabull properties
4. Perennial
5. Rickmers maritime
6. Hutchison port trust
Another business trust (TCT) is in trouble.
unlike REITs they are not obligated to payout 90% and operate unrestricted gearing.

AK71 said...

Hi goldmansion,

Your concerns are probably all valid. I am well acquainted with CitySpring and FSL, unfortunately.

Perennial China Retail Trust, I recently became a unitholder at 47.5c a piece. I thought it was an unattractive investment at its IPO price of 70c a piece.

Its gearing level is low and there is a clear growth trajectory through 2015. I like its securing of land parcels above high speed railway stations.

PCRT is something I will be holding for the next few years.

I remember a reader, Nick, telling me how TCT was not a bad proposition. I guess this shows how even good things could go dreadfully wrong. Bad luck, I guess.

As for Religare Health Trust, I really need more information before I could decide if I would add it to my portfolio.

B said...

Is it just me or more and more healthcare related are coming in to Singapore now... taking advantage perhaps?? IHH and now this...


Ray said...

Thanks for shedding light on RHT!

AK71 said...

Hi B,

It is natural for healthcare related businesses to capitalise on positive market sentiments towards the sector.

As investors, we will have to be more discerning in our choices. This is not an easy task, however.

AK71 said...

Hi Ray,

You are welcome. :)

This is something I am interested in. So, I delved a bit more into it but there isn't much by way of numbers. Will have to wait a bit.

Anonymous said...

I believe Indiabull properties is probably the biggest bull s*** among all the trust as since listing it has never pay out a single cents, not to mention that it is always in deficit.

It has also raise more funds via rights issue back in 2009, but nothing good has come out of it.

It seems even Acendas India trust is not doing that well, as india rupee is weakening against SGD for quite a huge forex loss!

AK71 said...

Hi SC,

Yes, forex risk must be taken into consideration. I suppose we must demand a higher distribution yield for a greater margin of safety.

I am wary of looking at this new business trust through colored lenses but I am only human.

Howyuan said...

I think ASX has some good yield stocks too, especially consumer related which had been punished due to high AUD. There are also interesting agricultural companies that attract no one.

Probably worth looking at if you want to migrate there to retire.


AK71 said...

Hi Howyuan,

In my younger days, I thought of migrating to Malaysia or Thailand for retirement as they are less expensive destinations. I was worried about whether I could afford to retire in Singapore.

Now, I feel that I can afford to retire in Singapore and this is preferred as all my familial and social ties are here. Of course, things could change and a retirement village in Phuket doesn't sound half bad if I do retire outside Singapore.

Australia? Nah. I have, thus far, heard more negative than positive accounts from friends who have moved there. Not for me.

JCK said...


You could retire earl-ier with your wealth in Paradise Sabah!


AK71 said...


I have been to Sabah a few times before but I have not been there in many years. Do they still have a problem with rats in Kota Kinabalu? Friends there always tell me horror stories about the abundance of rats in the city. Example, cars could run over rats scampering across the roads!

JCK said...

i never knew of problem with rats?

Yes, KK is not as clean as super clean Singapore. But its liveable in terms of stress levels and a still available green eco system.

BTW i only have sugar cane juice in Singapore and nowhere else! :)
Yes. Singapore is exceptionally clean and hygenic.

AK71 said...


My friends told me that years ago, the Sabah government actually rewarded people for catching and bringing in rats to help eradicate the problem. No?

As for sugar cane juice, hahaha, yes, my friends from Hong Kong also told me that they would only drink it in Singapore. They wouldn't touch it in Hong Kong even!

Once, I entertained thoughts of retiring in Kuching because I found it cleaner than K.K. and less crowded too. :)

AK71 said...

The business trust plans to sell 567.5 million units at a range of between $0.88 and $0.97 apiece, according to a prospectus lodged with the Monetary Authority of Singapore today. A business trust typically pays out a bigger proportion of its income as dividends than a regular company.

Fortis has hospitals and other health-care centers in 10 countries including Australia, Hong Kong, Sri Lanka, according to its website.

Last month, the company reported a first quarter loss of 196.1 million rupees ($4.5 million) compared with a profit of 289.4 million rupees a year ago.

Bloomberg, 28 Sep 12.

SnOOpy168 said...


The draft prospectus is here$File/Project%20Sapphire%20Preliminary%20Prospectus%20dated%2028%20September%202.pdf

A quick glance saw something like almost 9% yield but somewhere deep in the pages, it also says like 4-5% yield. Confused and drowned in such thick documents.

AK71 said...

Hi SnOOpy168,

I believe that the sponsor is waiving their share of income distributions for the first 2 years. Otherwise, the distribution yield would be lower.

Anyway, I have the impression that Fortis is listing the REIT because of its heavy debt burden. Could be a red flag.

I am sitting this one out and will wait for a couple of quarters post IPO to see how things turn out.

SnOOpy168 said...

Unlike Indonesian and Thai hospitals, I had no idea about private health care in India. So, i will join you and sit out by the ring side for a while.

AK71 said...

Hi SnOOpy168,

Indeed, India is more of a mystery to me than even China. ;)

K-Enterprises said...

Hi AK71,

By the way whats the rationale for entering Perennial China Trust and is it still good value at $0.50. Am currently vested at $0.488, pretty heavy though =((

AK71 said...

Hi Kelvin,

I believe in the investment theme that the Chinese consumers are a force to be reckoned with. There is more room to grow domestic consumption as a percentage of GDP.

I also believe that organised retail is part of a natural progression in any developing economy. China is one such example.

You might be interested in this blog post and the comments which follow:

Perennial China Retail Trust: Weak debut?

I believe its IPO was overpriced. It has a greater margin of safety now.

I also believe that anyone invested now must be in for the long term (at least till 2015). See comment dated 30 August and the slides presentation. Long term investors could be amply rewarded if everything proceeds as planned.

SnOOpy168 said...

got a Whatsapp from my broker asking if I want to book an order with him. @$0.80 and 1% comms BUT min. 20 lots and it is a "cannot back out and MUST take whatever lots that is allocated".

Seriously honoured that he remembers this small fish here but 1st time under such terms. And then @ 20 lot, I am just not too keen.

AK71 said...

Hi SnOOpy168,

Wah! You have a guardian angel for a broker. ;)

80c is 10% lower than the lowest end of the price range which is 88c per share. :)

SnOOpy168 said...

perhaps he needs to generate more volume. Out of the blue so far this year, this was his 2nd call.

anyway, just heard from Dow Jones that ARA will launch the Dynasty REIT, a near $800 million yuan-denominated initial public offering for a China-focused real-estate investment trust.

The fund manager plans to inject three Chinese commercial properties into Dynasty REIT's initial portfolio. The assets are located in Shanghai, Nanjing and Dalian.

Hmm... how will this compared to Perennial ? LKS has very close ties with the Chinese government

AK71 said...

Hi SnOOpy168,

I am surprised that the offer price is 80c because that is 8c lower than 88c, the low end of the range. Does this mean that the public offer is going to be 80c too?

Anyway, I have not bought anything at IPOs in many years. I will wait it out.

As for Dynasty REIT, I haven't even looked at it. So, I cannot comment.

Perennial China Retail Trust, however, I have been following, and the current offer price is still attractive but it does not mean it could not become more attractive. Investors who are prepared to hold till 2015 could be amply rewarded if everything goes as planned.

K-Enterprises said...

Thanks for the quick reply AK71. I rather be vested than have my cash lying in the bank!! Currently balanced my portfolio and am slight above 55% vested in the market with 45% as my war chest waiting for deployment ^^


AK71 said...

Hi Kelvin,

55% invested and 45% cash sounds very comfortable to me. :)

As long as a vast majority of our portfolio perform positively, it is better to stay invested, for sure.

AK71 said...

Religare Health Trust, expected to start trade Oct. 19, appears inexpensive at its $0.90 IPO price, or 1x its book value, Phillip Securities says, noting Ascendas India Trust trades at 1.27x P/B.

It notes the offering will raise around $510.8 million, with proceeds earmarked to fund the initial portfolio of 11 clinical establishments, four greenfield clinical establishments and two hospitals, all geographically diversified across India.

“RHT provides unique value proposition for investors to have exposure to the growing demand of quality healthcare services in India and Asia Pacific. We like RHT’s service fee revenues term structure that offers both downside protection (15 years term with annual escalation of 3%) and upside potential (7.5% of Fortis companies’ operating revenue). In addition, rising affluence in upper middle class segment and underserved Indian healthcare market would benefit RHT.”

It notes forex risk is the main concern, but currency translation is hedged through FY14. RHT’s annualised dividend yield of 9.0% looks appealing amid the current yield-starved period.

Dow Jones & Co, Inc
Tuesday, 16 October 2012

opal said...

Are you buying any from the IPO exercise?
I plan to wait and see.

AK71 said...

Hi opal,

Nope. Haven't bought anything at IPOs in many years. :)

AK71 said...

UNITS in RELIGARE Health Trust (RHT) closed at $0.81 in its debut on the Singapore Exchange (SGX) on Friday, nine cents lower than its initial public offering price of $0.90 per unit.

The trust commenced trading on SGX at 2pm, opening at $0.89 and hitting a high of $0.895 in intra-day trading before losing ground. At its lowest, it traded at $0.805.

The Business Times, 19 Oct 12.

AK71 said...

Religare Health Trust, which started trading in Singapore on Oct. 19, said it has hedged against foreign currency risks.

“The trust has put in place forward contracts to hedge its Indian rupee cash flows into Singapore dollar thereby mitigating the currency risk and consequent risk to distribution per unit,” it said in an e-mailed statement today.

Phillip Securities said in an Oct. 16 report that foreign exchange risk is the main concern for the trust. The brokerage also said Religare has forward contracts to hedge the currency for the next two years.

Bloomberg, 22 Oct 12.

AhJohn said...

Hi AK, do you visit this stock again? seems 9% div yield is sustainable for next 2 years (from dbs analysis).

AK71 said...

Hi Ah John,

I believe the next two years are not a problem. What I worry about are the years after that which is why I would only enter with a greater margin of safety. :)

AK71 said...

India's rupee fell to near its lifetime low on Friday, prompting the central bank to intervene in currency markets to drag the ailing unit up, dealers said.

The rupee hit an intraday low of 60.59 rupees to the US unit -- near its record low of 60.76 hit on June 26 -- as Indian importers bought dollars.

The Indian currency later pared some of its losses, helped by intervention from the central bank, dealers said, to close at 60.22 rupees to the dollar.


Elaine K said...


Religare is now offering 9.9% yield at $0.795.

Sufficient margin of safety?
Please think out loud loud! Ha!


AK71 said...

Hi Elaine,

I am concerned about the weak Indian Rupee which has declined 13% in the last 12 months against the S$.

The Trust hedged the exchange rate risk for 2 years only. So, 1 year more to go. After that, we could see DPU reducing if the Rupee remains weak.

Also, the DPU is what it is now due to the sponsor waiver and a 100% income payout. In another year, things might change.

Off the top of my head, once the sponsor starts taking their share of the distributable income, DPU could reduce some 30%.

My understanding of the Trust could be flawed but I am not comfortable enough to invest in it for now.

Elaine K said...


There are indeed so much more than just looking at yield.

Thank you so much for the insight...


AK71 said...

Hi Elaine,

You are welcome. :)

The picture is somewhat murky for me or maybe I just don't know the Trust well enough.

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