Indian healthcare provider plans Singapore IPO

Expert says around S$510.8mn will be raised from the IPO, even higher than the firm expects.

Religare Health Trust, on Monday (October 15) announced that it is looking to raise a total of $417.9 million from Singapore IPO. RHT is scheduled to list on the third week of Oct-12.

95% of the proceeds will be uitilised to partially fund the initial portfolio. Its initial portfolio consists of 11 clinical establishments (S$714mn), four greenfield clinical establishments (S$29mn) and two hospitals managed and operated by RHT (S$5mn), which are all geographically diversified across India.

But according to PhillipCapital, approximately S$510.8mn will be raised from the public offering. "At the IPO price of S$0.90, RHT is trading at one time to its book value and appears inexpensive," it said.

Here's from Travis Seah, anlyst at PhillipCapital:

RHT provides unique value proposition for investors to have exposure to the growing demand of quality healthcare
services in India and Asia Pacific. We like RHT’s service fee revenues term structure that offers both downside protection (15 years term with annual escalation of 3%) and upside potential (7.5% of Fortis companies’ operating revenue).

In addition, rising affluence in upper middle class segment and underserved Indian healthcare market would benefit RHT. Foreign exchange risk is the main concern for RHT but forward contracts are put in place to hedge the currency translation up to FY2014.

On the valuation, RHT is priced at one time to book. The price of RHT appears inexpensive on the P/B basis relative
to the rich P/B valuation of Ascendas India Trust (a-iTrust) at 1.27 times which is way above its historical P/B mean of 0.83. Annualised FY13 dividend yield of 9.0% including the distribution wavier (up to FY2014), looks appealing given the current slow growth and yield-starved period. By stripping out the distribution wavier, the yield is around 6.5% which is lower than a-iTrust yield of 7.1%. The institutional tranche was 2.5 times oversubscribed according to the news flow compared to Courts Asia which was 3.4 times subscribed.

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