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"E-book" by AK

Second "e-book".

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

Thursday, February 16, 2017

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.

24 comments:

K said...

Hi AK,

You are a winner... you can sell now and collect your "dividend" now. :)

AK71 said...

Hi K,

You are a bad influence. Bad K! Bad K! ;p

I am holding on to my investment because I think RHT will do much better in the next 2 years. Crossing fingers. :)

redponza said...

Hi AK,
I already have quite a bit of exposure to RHT (around 5% of my portfolio).
For me to add more, I will demand a 8% yield.
8%? =.=

Ok, I will at least demand a 7% yield at the very least.
Which the plunge yesterday cannot fulfil...

On the other hand, when I was alerted of the fall yesterday, the price was at around 0.82-0.83. I pondered a bit and ignore the SLIGHT fall and went back to work.
I was alerted of a GREATER fall when the stock plunged to 0.71 then rose back to around 0.8...At that moment, I was like "Geez, if I know it will fall that know, I may just buy some for speculation/dividend"
This is really unfortunate...

AK71 said...

Hi redponza,

RHT as a percentage of my portfolio is much lesser than 5%.

71c would have given you a 7% yield based on a DPU of 5c but it was really a touch and go.

Unintelligent Nerd said...

Alamak! I missed it >.<

AK71 said...

Hi UN,

I don't know when but the boat will come back. ;)

Student Always said...

Hi AK-
May be I am missing something; doesn't SGX website show that RHT paid more than 5c dividend in 2016?

Ex-Date Pay Date Type Price

15/Nov/2016 09/Dec/2016 Cash S$ 0.036
19/Oct/2016 28/Oct/2016 Cash S$ 0.248
02/Jun/2016 15/Jun/2016 Cash S$ 0.038

AK71 said...

Hi SA,

Those numbers are history.

Do you expect RHT to have similar DPU in 2017?

Arthur Wang said...

One word, "Remarkable".

AK71 said...

Hi Arthur,

I believe I was lucky. :)

foolish chameleon said...

amazing, did you set a price alert or something? its like you were waiting to pounce , entry almost at bottom !

AK71 said...

Hi FC,

I was at the right place at the right time. Lucky. :)

redponza said...

Believe that price alerts are needed for shares that you are monitoring.
Anyhow AK is really lucky!

wanchai30 said...

Dear AK71,

I chanced upon your blog by chance a couple of weeks ago and have been looking for you to talk to yourself. Have learnt a lot in the area of investing as a newbie despite passing my half life a couple of years ago.

Just a question, how did you get notification for a drop in price of a particular stock, i supposed your purchase is done online.

Thanks,
Pat

AK71 said...

Hi Pat,

Welcome to my blog. :)

I didn't set any alerts. I just happen to see it. Lucky.

If I am home which is almost always, I am at my PC most of the time. ;)

AhJohn said...

Wah! At PC most of the time!
AK, can share what websites you normally reading?

AK71 said...

Hi Ah John,

The 2 websites I spend the most time at these days?

kissasian.com

9anime.to

Don't say you don't believe me, OK? ;)

AhJohn said...

haha, AK, I think you will see tons of comment soon. Jaw dropped :)

AK71 said...

Hi Ah John,

I don't know why so many don't believe that I spend a lot of time watching K-drama and anime these days. I am just enjoying my retirement. -.-"

Alcus Trader said...

Hi AK,

Don't worry, I believe you! Although not as "lucky" as you, I got it at $0.73.

https://4.bp.blogspot.com/-TSH3WdBwVJA/WKRhhNvbmSI/AAAAAAAAB50/jRgIKiJp_i8v0yUE04zFtDxXhNFdWRjmgCLcB/s400/20170215_192954_resized.jpg

AK71 said...

Hi AT,

Congratulations! :)

keng said...

Hi AK,

You should watch K-drama 'Goblin' if you haven't watched yet ;)

AK71 said...

Hi keng,

I watched Goblin and also the specials in the last 4 days. ;p

AK71 said...

RHT Health Trust on Monday was queried by the Singapore Exchange on unusual share-price movement, which comes as a Bloomberg report said major shareholder Fortis Healthcare is considering a buyout.

The stock was up 3.5 Singapore cents, or about 4 per cent, to S$0.90, as at 10.51am. The regulator has sought an explanation for the share-price movement.

Bloomberg said Fortis Healthcare, India's second-largest private hospital chain by market value, is weighing a buyout of the Singapore-listed business trust that owns some of its clinics.

Source:
http://www.businesstimes.com.sg/companies-markets/rht-health-trust-queried-amid-talk-of-shareholder-buyout

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