Religare Health Trust: Initiated long position at 88c.

I avoided investing in Religare Health Trust although I felt quite positive about the healthcare industry in general.

I avoided investing in the Trust because I was concerned about the weakness of the Indian Rupee against the Singapore Dollar. I was also concerned about the financial engineering involved to make its distribution yield more attractive to investors at its IPO when units in the Trust were offered at 90c a piece.

What financial engineering?

In the middle of last year, I shared a conversation I had on FB that the sponsor waiver to income distributions ended on 31 March 2014. The sponsor held some 28% of the units. So, without the waiver, a proportional decline in DPU for other unit holders should be expected. Of course, if Mr. Market had expected the high yield to be maintained, the Trust's unit price could then decline.

Well, we now know that Religare Health Trust's unit price went on to touch a high of $1.14 on 6 February 2015. Astounding!

The main reason is probably because the Trust has demonstrated its ability to improve its revenue organically quite strongly which makes up for the expiration of the sponsor's waiver to their share of the distributable income. This is quite impressive. Additionally, a gearing level of only 15% gives the Trust ample debt headroom for inorganic growth too.

I know from reliable sources that India's public healthcare system is severely underfunded. So, for those who can afford to pay more and there is a growing middle class in India, they are willing to pay for better private healthcare. This probably explains Religare Health Trust's pricing power.

I have initiated a long position today at 88c a unit which is some 23% lower than the high of $1.14 seen in February this year.

Religare Health Trust distributes income half yearly. Its last DPU was 3.71c. Annualising this would give us a distribution yield of 8.43% with an entry price of 88c a unit.

Sentiments are quite negative about Asian currencies now and we could see Mr. Market selling down the Trust if sentiments worsen. If there should be another meaningful decline in its unit price, I would probably be increasing my exposure to the Trust.

Related post:
Religare Health Trust: Opinions?

VICOM: Initiated long position at $5.71.

I drive and I own a car. So, I should be interested in VICOM. Sounds straightforward enough.

I have been looking at it for a year or so but found that the valuation was a bit rich.





During one of the evenings with AK and friends, we had a lively discussion regarding VICOM's future too.

As is the case with any asset, when everybody wants a piece of it, price goes up. VICOM's price skyrocketed not too long ago. 

At those prices, its PE ratio was closer to 20x. I wasn't prepared to pay that high a PE ratio for the stock. 





It wasn't too long ago that the PE ratio was closer to 15x, I observed.

2014's EPS was 34c. Assuming 5% growth in 2015, EPS could be 35.7c this year. 

A 15x PE ratio would give us a fair value of $5.36 or so per share.




Assuming a 50% pay out ratio, we could see a DPS of 18c which would give a dividend yield of 3.35% in the year 2015. 

It isn't a sexy proposition, admittedly, especially when we expect risk free rates to rise in future.



Based on technical analysis, during an "Evening with AK and friends", I mentioned that VICOM could retreat to $5.50 a share which is where the share price might find support from a golden ratio (161.8%) if we believe in Fibo lines.




In the meantime, looking at the charts, we see possible supports at $5.82, $5.70 and $5.61. These are possible nibbling points.

This morning, my smallish overnight BUY order was filled.

Related post:
Have a plan, your own plan.