Religare Health Trust’s Latest Earnings: Broad-Based Growth Seen

Religare Health Trust (SGX: RF1U), or RHT in short, released its first-quarter earnings for the fiscal year ending 31 March 2016 (FY2016) last Thursday evening. The reporting period was for the three months ended 30 June 2015.

RHT is a business trust which invests in healthcare assets in India. It currently has 18 healthcare assets in its portfolio that’s located across the country. These assets have a total installed bed capacity of 3,590, an operational bed count of 2,645, and an additional potential bed capacity of 874 as at 30 June 2015. They also have a collective value of S$991 million as at 31 March 2015.

You can read more about RHT in here. With these as a backdrop, let’s dig into RHT’s latest set of financials.

Financial highlights

The following’s a quick take on RHT’s reporting quarter:

  1. Total revenue rose 6% year-on-year from S$33.35 million to S$35.37 million mainly due to an increase in service fees and hospital income.
  2. The trust’s total expenses, up 8% from S$22.42 million a year ago to S$24.3 million, had increased slightly faster than revenue. The expense growth had been partly due to unfavourable currency movements between the Indian rupee and the Singapore dollar which led to RHT clocking foreign exchange losses of S$5.41 million, up significantly from the figure of S$0.19 million seen a year ago.
  3. But, RHT seems to have managed the currency fluctuations well as it registered a fair value gain of S$5.34 million on financial derivatives which happened as a result of the relative movements between the rupee and the dollar.
  4. All the above dynamics, coupled with a 24% decline in income tax expense, had led to RHT’s net profit for the quarter rising 147% year-on-year to S$12.30 million.
  5. After adjusting for certain non-cash items, the trust’s distributable income came in at S$15.44 million, up 7.8% compared to a year ago.
  6. On a per-unit basis, RHT’s distribution also increased by 7.4% year-on-year from 1.81 Singapore cents to 1.94 cents.
  7. RHT ended the reporting quarter with a gearing ratio (total debt over total assets) of 12.1%, up slightly from the figure of 11.2% seen a year ago.
  8. On a brighter note, the trust’s interest coverage ratio (EBITDA divided by financial expense) had stepped up from 13.5 at the end of FY2015 to 15 at the end of the reporting quarter. This is important to note as the trust’s interest coverage ratio had been falling in recent years, from 30.1 at end-FY2013, to 27.4 at end-FY2014. In addition, a higher interest coverage ratio gives the trust more room for error given that only 46% of its borrowings are on fixed rates; the low percentage of borrowings on fixed rates makes the trust’s bottom-line susceptible to negative impacts from any future increase in interest rates.
  9. RHT ended the reporting quarter with a net asset value per unit of S$0.907, up 5.8% from a year ago.

Business highlights and prospects

In the reporting quarter, RHT’s average revenue per operating bed (ARPOB) clocked in at INR13.47 million, up 9.4% from the first-quarter of FY2015 and 32% from the first-quarter of FY2014. RHT’s latest ARPOB also represents eight consecutive quarters of quarter-on-quarter growth.

The operational snag here is that the trust’s occupancy rate for its healthcare portfolio came in at only 72% in the first-quarter of FY2016; this is down from the self-same figure of 74% seen a year ago.

In the earnings release, Gurpeet Dhillon, the chief executive of RHT’s Manager, had the following comments regarding the trust’s future outlook:

“Plans are in place to enhance the facilities and add more beds at our existing Clinical Establishments. These will serve to augment the existing Variable Fee revenue for the current portfolio. The Variable Fee of RHT will be further enhanced upon the completion of the brownfield and greenfield projects at BG Road and Ludhiana. In addition to these initiatives, we will continue to identify means to improve the Distributable Income for our unitholders.”

Based on RHT’s closing price of S$1.05 last Thursday, the trust’s units carry an annualized yield of 7.39% and a price-to-book ratio of 1.16.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn't own shares in any companies mentioned.