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Religare Health Trust to be bought for $966m.

Wednesday, November 15, 2017

Religare Health Trust's unit price spiked after news that Fortis is seeking to delist the business trust was released earlier this morning.

Surging to as high as 96.5c a unit, it was a 19% increase from the previous trading session in a matter of minutes.





"In an exchange filing on Wed morning (Nov 15), RHT Health Trust Manager Pte Ltd said it has received a proposal from Fortis to acquire all the sale securities held by RHT Singapore's wholly-owned subsidiaries, Fortis Global Healthcare Infrastructure Pte Ltd and RHT Healthtrust Services Pte Ltd.



"The trustee-manager has not declared a distribution for the six months ended Sept 30, as it has not received certain service fees and interest income on the CCDs from the relevant Fortis entities; Fortis is proposing for these to be paid alongside the purchase consideration."

Read article here:
Fortis proposes to buy RHT Health Trust's entire asset portfolio for S$966m





With about 810 million units in issue, if this goes through, a back of the envelope calculation shows that each unit could be getting more than a dollar.

Although it seems that I will be losing another passive income generator, I cannot really complain if it is a more than fair offer.

For those who are thinking of punting, please remember the risk involved.


If the purchase should fail, unit price would probably take a dive back down.





Related post:
Increased investment in RHT by 150%.

35 comments:

Simp said...

Lucky you :)

AK71 said...

Hi Simp,

Thank you. :)

There is always a place for luck in anything we do. ;)

AK71 said...

Reader says...
Just a friendly note, RHT is an asset disposal so proceeds will need to repay all outstanding loans. Did you account for that when you calculated above $1 exit price? (Some gurus are suggesting around 95 cts a unit.)

AK says...
Yes, I did but it was a back of the envelope calculation. I am not very good at math. 95 cents per unit? Could be the case. ๐Ÿ™‚

Reader says...
Well you might still be right. So long as you accounted for liabilities it's ok then.
Clearly there is upside at current price.

AK says...
It would also depend on exchange rate.
There is probably some room for arbitrage.

Laurence said...

Counters curated by the Oracle of Reits always turn to gold after his Midas touch.
All readers will be wise to note.

AK71 said...

Hi Laurence,

It is important to remember that I have made mistakes before.

For example, I lost $100K investing in Marco Polo Marine.

See:
http://singaporeanstocksinvestor.blogspot.sg/2017/04/100000-lesson-from-marco-polo-marine.html

AK71 said...

Sent to me by a reader:

RHT Health Trust received an unsolicited proposal from controlling unit holder, Fortis Healthcare (29.76% stake), to acquire its entire asset portfolio held under two Indian subsidiaries and 49% owned Fortis Hospotel for an estimated Rs46.5b.

The asset portfolio of RHT comprises its interests in 12 clinical establishments, four greenfield clinical establishments and two operating hospitals (3.6m sf) across 10 states in India, with total value of $1.12b.

The purchase consideration would be adjusted for 1) any change in net current assets of RHT's Indian subsidiaries and 2) up to Rs1.43b of outstanding service fees and interest due on Compulsorily Convertible Debentures owed by Fortis, up to deal completion date.

If the sale is successful, RHT will monetise $966.8m-996.6m from its portfolio.

Excluding $120.3m of debt sitting at the trust level, this works out to $1.047-1.085 per unit.


The two parties have signed a term sheet and entered into exclusive negotiations over the next 60 days from 14 Nov '17 (ending 13 Jan '18) to close the deal.

Source:
Maybank KE Retail Research, 15/11/2017.

Charles Liu said...

should have bought more when it dropped to 0.795... didnt know what was brewing back then... but anyway its a good brew :)

AK71 said...

Hi Charles,

Still brewing.

It isn't over until it is over. ;p

AK71 said...

Nomura estimates that the offer price translates to a unit cost of about $0.90 to $0.91 per share - although it is the portfolio that is for sale rather than the trust. Analysts generally agreed the price was fair.

In a briefing with analysts, the manager of the trust said it believes that the deal is compelling because the trust has yielded 65 per cent in total shareholder return, including five years of dividends, since it listed in 2012.

Source:
http://www.straitstimes.com/business/companies-markets/966m-offer-for-rht-health-trust

cheryl2010 said...

Hi AK,

Just wondering if the offer price is 90 to 91 cents, then current price 86 cents is a good deal to buy assume if deal goes through? :)

AK71 said...

Hi Cheryl,

If the calculation is correct and if the deal happens, then, it is safe to buy at 86 cents a unit. ;)

AK71 said...

Reader:
... can you comment on what the trust can do with an empty portfolio? Recapitalization?

AK:
My only experience with something like this was Saizen REIT. Eventually, also delisted. I will just wait and see. :)

Laurence said...

Privatisation seems to be fashionable nowadays.
Any chance of Olam being taken private as well with this latest news below?

Olam International' s public float drops below 10%
FRI, NOV 17, 2017 - 6:41 PM

Olam International Limited said after trading hours on Friday that as a result of the issuance of new shares, the percentage of its shares held in public hands has fallen below 10 per cent to approximately 9.31 per cent.

Under the rules of the Singapore Exchange (SGX), this means trading in Olam' s shares might be suspended.

In an earlier announcement on Friday, Olam issued 91.3 million new shares following the exercise of an aggregate of 91.3 million warrants at the price of US$1.09 each.

There is an aggregate of about 59.2 million outstanding warrants which remain exercisable up to 5pm on 29 January.

In a SGX filing, Olam said that assuming all of the outstanding warrants are validly exercised and the number of shares held by members of the public otherwise remains constant, this will cause the percentage of shares held in public hands to increase back to above 10 per cent before or around the relevant date.

Olam International's public float drops below 10%

AK71 said...

Reader says...
I saw your blog that Fortis proposed to buy RHT health trust at $966m. In this case, do we need to less off the existing debt to find out the approximate offered unit price?
Without debt - 966M/810 units ~ 1.19
Or with debt (966-204)M/810 units ~ 0.94

AK says...
It depends on which analyst you believe. Maybank KE says worth $1.04. Nomura says worth 91c. I also blur. So, I do nothing. ;p

Laurence said...

A forummer wrote to RHT and the reply was posted in sharejunction as copied over below. Apparently, the debt is $210m rather than $120.3m :

"Thank you for your email. Please find our replies as follows:

Are you able to disclose that Fortis offer does not include the debts including notes which is about S$210m?
Yes, this is correct. The purchase consideration is before the payment of debt in RHT.

And net proceeds from the deal will be about S$756m which works out to be about S$0.93 per units?
I am afraid we do not comment on the net price per unit at this point in time because the consideration has to be adjusted for the estimated transaction-related costs, payment of debt and third party liabilities at the time of completion of the transaction. As the consideration is in INR terms, the prevailing INR/SGD exchange rate at the point of completion of the transaction also needs to be taken into consideration as well. You may refer to the analyst coverage on our website (http://rhtrust.listedcompany.com/analyst.rev) for the target price by the various analysts.

Is RHT will pay the 2.36 cents DPU for 1H FY18 plus pro-rata of the remaining DPU until the deal complete?
At this point in time, certain service fees due to RHT have not been fully received from the subsidiaries of Fortis Healthcare Limited (" Fortis" ) in respect of the 1HFY2018. In view of the foregoing, the Trustee-Manager has not declared a distribution for the 1HFY2018. Fortis has proposed to pay the outstanding service Fees which is due within 60 days of the signing of the term sheet. This is as stated in the announcement of the asset disposal transaction. If the funds are received from Fortis prior to the transaction closing, then the Trustee-Manager will consider declaring a distribution for the 1HFY2018 ahead of transaction closing, subject to compliance with Trust Deed and the listing manual.
If Fortis does not pay the outstanding service fees, then the purchase consideration will be adjusted upwards for the service fees outstanding. The service fees will also accrue up to the date of completion of the transaction.

Please let us know should you require further information. Thank you."

AK71 said...

Hi Laurence,

Thanks for sharing this.

Still too much fog.

I am just going to wait and see what happens.

Laurence said...

Ooooopppps....looks like the parents of RHT is in deep s**t. Actually it's two separate big piles of s**t :


Billionaire Singh brothers accused in lawsuit of siphoning money

Delhi High Court upholds Daiichi’s Rs 3,500-crore arbitral award against Singh brothers

Charles Liu said...

RHT is now 0.75. Wonder what would happen if to buy now? What are the pros and cons? Please share your thoughts

Charles Liu said...

http://www.ibtimes.sg/fortis-healthcares-promoters-quit-crisis-looms-24299

AK71 said...

Hi Laurence and Charles,

RHT and Fortis are different entities.

Definitely, they are also not the same as the Singh brothers.

Apart from counter party risk, I think RHT looks healthy.

Charles Liu said...

if RHT looks healthy, then it looks yummy at the current price

Charles Liu said...

https://timesofindia.indiatimes.com/business/india-business/singh-brothers-siphoned-rs-500-crore-from-fortis-claims-report/articleshow/62857574.cms

Check this article...

Wonder whats the outlook for RHT and whether if the buy over will still happen.

Charles Liu said...

http://www.ibtimes.co.in/markets-plunge-volatility-surges-this-stock-soaring-759979

Fortis shares soar

Boon Guan Tan said...

Hi Ak,

I think the downside risk is limited. The most the deal does not goes through with Fortis.
I just bought a bit for RHT trust to average down.

Roaming fighter said...

Congrat AK
http://infopub.sgx.com/FileOpen/RHT_Ruby%20Announcement_13Feb18.ashx?App=Announcement&FileID=488844

AK71 said...

Hi Charles, Boon Guan Tan and RF,

Thanks for the comments. :)

Things are panning out nicely. :)

Boon Guan Tan said...

Hi AK71,

I will need to look for a new dividend source to replace RHT.
Currently, still holding cash from the delisting of both Saizen and Croesus.

Haiz :(

AK71 said...

Hi Boon Guan,

I am investing in ComfortDelgro and SingTel for income.

Their yield is not so high as Saizen and Croesus but they are different animals, of course.

Charles Liu said...

http://www.businesstimes.com.sg/companies-markets/rht-health-trust-seeks-bondholders-nod-for-sale-to-fortis-maturity-extension

AK71 said...

Hi Charles,

Bondholders should be happy with the additional 0.45%, I feel.

"As part of the consent solicitation, the trust manager is also asking bondholders to extend the maturity date on the notes by six months, to January 2019. The redemption amount at maturity will however be raised to 100.45 per cent of the principal amount."

Charles Liu said...

https://www.fool.sg/2018/04/04/what-investors-need-to-know-about-rht-health-trusts-proposal-to-sell-its-assets/

so the estimated final net proceeds of S$0.86 per unit? :)

Charles Liu said...

Hi AK, my avg price is near to the estimated 0.86 pay out.

It's quite a significant portion in my portfolio so I'm thinking if I should average down further.

What should I consider?

AK71 said...

Hi Charles,

I am sure you have been following all the news and analyses available.

There are so many different estimates on how much will be paid out but only the manager of RHT knows exactly how much will be paid out.

Till now, we only know for sure that proceeds will be "substantially" paid out.

If you are buying because you think the pay out is 86c a share, bear in mind that you could be disappointed.

However, if you are buying because you think current unit price is undervalued, then, it is less speculative. :)

Charles Liu said...

Thanks AK :)

Charles Liu said...

http://www.businesstimes.com.sg/companies-markets/fortis-woes-pile-pressure-on-singapore-listed-rht-health-trust

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