Religare Health Trust

Religare Health Trust: 1QFY15 results were in-line, as core DPU rose 25% y/y to 1.8¢, following the expiry of the Sponsor Waiver. Distributable income was up 26.2% to $14.3m on revenue of $31.1 m (+27.4%), boosted by full contributions from the Gurgaon Clinical Establishment (Gurgaon CE) and new revenue stream from the Mohali Clinical Establishment (Mohali CE) which was acquired in May ‘14. Net service and hospital income rose 33.6% to $21.9m, representing sustained demand across RHT’s portfolio of clinical establishments and operating hospitals. This was also due to a rise in operating margins, as expenses did not increase in proportion to the rise in revenue due to cost control measures implemented by management Operationally, Average Revenue per operating bed (ARPOB) grew by 15% q/q, partially lifted by the Mohali CE and the Gurgaon CE, both of which command higher ARPOBs due to the higher end medical services offered. Portfolio occupancy remained at a healthy level of 74%. Balance sheet is strong, with aggregate leverage at 15.1%, giving the trust ample debt headroom of $338.0m based on a 40% target ratio. Management maintains the long term positive outlook for the Indian healthcare industry, supported by the growing population and rising income levels and by the government's push for improved service levels. The group guides that the recent additions of Gurgaon CE and the Mohali CE, have shown very encouraging results, with both CEs having achieved an ARPOB that is above the portfolio’s average, demonstrating strong demand for high end medical services. RHT will capitalise on this demand and look for expansion opportunities when optimal and appropriate. At the current price, Religare Health Trust trades at an annualized 8.0% FY15 yield and 1.06x P/B, versus its healthcare peers of 6.1% forward yield and 1.35x P/B.