Increased investment in Religare Health Trust (RHT) by more than 150%.

Religare Health Trust's (RHT) latest results missed expectations but yesterday's massive decline in its unit price was surprising and, I thought, excessive.

The sale of a 51% stake in FHTL impacted RHT's income. 

Distributing the proceeds as a special dividend also meant that its NAV per unit declined to 83.8c. 




DPU for the quarter ended 31 Dec 16 was 1.25c, a big year on year decline of almost 31% but most of it should be expected because of a reduced contribution from FHTL. 

Without accounting for this, however, DPU would still have reduced by a few percentage points (i.e. pretending that RHT did not sell a 51% stake in FHTL). 

Trying to figure out how much is a reasonable price to pay for RHT, I referred to my long time healthcare REIT investment, First REIT. 




At $1.27 per unit, First REIT offered a distribution yield of about 6.7%. 

RHT's gearing level is 26.6% while First REIT's gearing level is 31.1% (perpetual bonds lowered gearing ratio from 34.4% to 30.0% last year). 

So, First REIT should offer a higher yield since it is more highly geared.

Nonetheless, if we expect a quarterly DPU of 1.25c from RHT to be the norm from now (however unlikely), with an annual DPU of 5c, to get a 6.7% distribution yield or more, a unit price of 74.5c or lower is required.

Although surprised by the speed and depth of the plunge in unit price, as I already had an idea of what was probably a pretty reasonable price to pay, I simply acted and more than doubled my investment in RHT.

All else being equal, the additional investment I made in RHT will offer a distribution yield of about 6.9% which is probably quite decent for a healthcare REIT now.

One reason why I decided to invest in RHT was discovering how India was not doing enough to provide healthcare for her people. 




I found out from watching an interview with an Indian Nobel prize winner. 

My independent research since then tells me again and again that there is a lot of room for growth in India's health care sector. 

An example of my research:

Source: The Hindu, 13 Sep 16.

I believe that RHT's income would improve in the next couple of years not only because of increasing fees but also because almost 600 beds will be added by development projects to be completed as well as asset enhancement initiatives (AEI) in existing assets.





A child cannot throw a tantrum forever because the child will run out of energy, grow tired and stop. 

Mr. Market is no different.

Source: DBS Research, 7 Feb 17.

Read the companion blog on investor psychology: HERE. 
First REIT's presentation: HERE.
RHT's presentation: HERE.