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3 Things Investors Should Know About RHT Health Trust

RHT Health Trust (SGX: RF1U) is a business trust that owns a portfolio of healthcare assets that are based in India. These assets are collectively worth S$1.1 billion (as of 31 March 2016) and comprise 12 clinical establishments, five greenfield clinical establishments, and two operating hospitals.

The trust is currently trading near its 52-week low, which prompted me to take a look at its business. Here are three things about RHT Health Trust I found that can give investors a simple but effective overview:

1. Growth profile

rht-health-trust-bed-capacity-chart
Source: RHT Health Trust investor presentation

The two charts above provide a quick summary of the historical growth of the trust as well as its growth potential. The company ended its fiscal 2016 (fiscal year ended 31 March 2016) with 2,651 operational beds, which is a 55% increase since its listing in October 2012.

The trust has an installed bed capacity of 3,593, which is 36% higher than its current operational bed capacity of 2,651. All told, RHT Health Trust has a potential total bed capacity of 5,881, which is over 120% higher than the aforementioned operational capacity.

2. Recent quarterly performance

In the six months ended 30 September 2016, RHT Health Trust saw its revenue and profit attributable to unitholders fall by 1% and 6%, respectively, compared to a year ago. A weakening of the Indian rupee against the Singapore dollar had played a huge role (the trust reports in the Singapore dollar but conducts business mainly in the Indian rupee).

3. Diversity of income sources

RHT Health Trust would face concentration risk if it depends heavily on only a handful of clinical establishments for income. The trust appears to be diversified with its largest asset contributing only 23% to total revenue. You can see this in the chart below:

rht-health-trust-asset-concentration
Source: RHT Health Trust earnings presentation

In fact, the trust’s next three largest assets collectively account for only 33% of its total revenue.

That being said, the trust is still exposed to a form of concentration risk since all its assets are related to the healthcare industry in India. Thus, any downturn in the healthcare sector there could have an impact on the trust’s earnings. This risk is mitigated somewhat by the idea that healthcare services is a need not a want – demand should still be present even in bad times.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.