Wednesday, 3 October 2012

Religare Health Trust (Preview)



Religare Health Trust ("RHT" or the "Trust") is doing its book building now. I will do a more detailed write up when it is finally launched.

The offering statistics are as follows:
Issuer: Religare Health Trust
Sponsor: Fortis Healthcare Ltd
Issue size: 567,455,000 shares
Implied Yield 2013E : 8.46% to 9.10%
Implied Yield 2014E : 8.66% to 9.29%
Price range : $0.88 - $0.97
Expected Listing Date : 19 Oct

Just as a way of background, Fortis lost to Khazanah in 2010 over the battle of Singapore's Parkway. Fortis is now launching its Trust into the Singapore market.

RHT is the first business trust with an initial portfolio of healthcare assets in India to be listed on the mainboard here. It consists primarily of Indian healthcare assets (2 hospitals, 11 completed clinical established with another 4 in the pipeline).

My "off-the -cuff" comments:

Indian listings have not done well traditionally on SGX

Indian listings have traditional not done well. Looking at how Ascendas Indian Trust, Indiabulls, Meghmani have performed.Very scary. In fact, the Reliance Communications Ltd aborted its IPO plan in July this year, citing weak market conditions. More likely it meant "weak demand". Investors who have 'bought and hold' the above counters will probably be crying. "Make Money - Meghmani" become "Lose Money". The 5 year chart of Meghmani is below for reference. IPO price was 28c.



Forex risk.

Given that the assets are all located in India, the revenue and profits are priced in INR, thus investors here will be exposed to forex risk. This is the 5 year forex chart and you can see that INR has depreciated very significantly against the SGD.



My wish list was that they should have followed IHH Berhad's example and list a diversified portfolio of hospital assets which we are more familiar with instead of purely Indian assets.

India is no longer an "in" country

India has currently lost its flavor with Investors because of confusing legislation and tax regime. You won't know if RHT becomes hit with these.

Anyway, precisely because of the above reasons, the Trust will need to attract potential investors with higher yields. Unfortunately, with 10 Year Indian government bond trading at more than 8%, i really can't see why the Trust will be attractive to investors who want Indian exposure.




Preliminary Conclusion - Avoid

I will give it a miss but unfortunately i will probably be allocated some. hahaha.... :)

4 comments:

Anonymous said...

You can't compare it to a bond: the REIT is supposed to protect from inflation (ie: long term, the underlying assets should gain value along with inflation), whereas the bond does not.

This is in fact one reason why, under high inflation, a REIT is a lot better than bonds.

Mr. IPO said...

Probably if you want to look at it from this angle, you can. But on the other hand, a govt bond is supposed to be the benchmark of "risk-free" rate?

Swee Chye said...

I agree with Mr IPO.

Reit, no matter how defensive, can slide in price, esp. in a weak market as compare to bonds, which is more stable. Bond at least has a definitely payout, whereas REIT in a depress situation, may hold back any form of dividend. India Bull is the biggest bulls*** where it has not given any dividend or payout from IPO. Saizen, during the GF crisis, had to withhold dividend, until they sorted out its re-payment debts.

The Forex risk wherre the slide of India rupee to SGD is terrible, any company whose currency is in rupees will almost have a decline in revenue and profits in sgd terms.

Anonymous said...

Yes a gov bond should be the benchmark, but as always with bonds you have to factor the inflation: if I am not mistaken India has more than 7% inflation, so a 8% bond is really paying you 1% in real terms.

With bonds you know how much you'll get back when they expire, but you don't know how purchasing power this will represent when that happens...

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