HI ZEROBETA.
WITH RESPECT TO 1 AND 2, I SUGGEST THAT YOU E-MAIL THE INVESTOR RELATIONS DEPARTMENT. THEY ARE QUITE RESPONSIVE.
WRT 3, I AGREE THAT THE 3% INCREMENT IS VERY LOW AND LIKELY TO REMAIN SIGNIFICANTLY BELOW INFLATION IN INDIA BASED ON HISTORICAL LEVELS. HOWEVER, DO NOTE THAT THEY ALSO RECEIVE A VARIABLE FEE OF 7.5% OF NET OPERATING INCOME ON TOP OF THE BASE FEE.
WRT 4, I THINK YOU GOT YOUR DATES WRONG. BASED ON THE Q2 FINANCIAL PRESENTATION, THE DECEMBER 2014 DIVIDEND IS HEDGED AT INR 53.19 AND THE JUNE 2015 DIVIDEND AT INR 51.38. THEY NORMALLY HEDGE THE DIVIDEND 12 MONTHS IN ADVANCE, SO I WOULD EXPECT THAT THEY HAVE NOW HEDGED THE DECEMBER 2015 ONE AND PRESUMABLY AT SOMETHING CLOSER TO INR 46 OR SO.
I AM CURRENTLY VESTED (BUT AT A VERY LOW COST) AND HAVE CONSIDERED SELLING. HOWEVER, WHAT IS HOLDING ME OFF ARE THE FOLLOWING :
(1) IF YOU LOOK AT PAGE 3 OF THE Q2 PRESENTATION, THEY STATE THAT THE ANNUALISED FY 2015 YIELD WOULD HAVE BEEN 8.8% INSTEAD OF 7.6% HAD AND FX RATE OF INR 46.77 BEEN USED. THEY FURTHER STATE THAT THEY USED SGD 0.95 PER SHARE FOR THIS CALCULATION. BACKING OUT THE INR AMOUNT OF THE DIVIDEND (0.95 x 8.8% x 46.77) GIVES US ABOUT INR 3.9 DIVIDEND PER SHARE OR SGD 0.085 (USING A SPOT FX RATE OF INR 45.5 WHICH IS THE CURRENT ONE). SO, ASSUMING THAT THE INR/SGD FX RATE STAYS STABLE, FOR FY 2016 (IE JUNE 2015 TO JUNE 2016), WE ARE LOOKING AT A DIVIDEND YIELD OF 8.1% (8.5 CENTS DIVIDED BY CURRENT SHARE PRICE OF $1.05) WHICH IS DECENT. OF COURSE, THIS IGNORES ANY HEDGING COST AND ALSO ASSUMES THAT INR WILL NOT SELL OFF. I AM WILLING TO TAKE THAT CURRENCY BET (AT THE MOMENT) AS OIL PRICES HAVE HALVED WHICH HAS SIGNIFICANTLY REDUCED THE AMOUNT OF USD THAT INDIA HAS TO BUY EVERY MONTH TO PAY FOR IMPORTED OIL AND THAT IN TURN HAS HELPED THE INR STRENGTHEN. FURTHERMORE, GLOBAL INVESTORS ARE VERY POSITIVE ON INDIA LEADING TO USD INFLOWS (IE FOREIGN INVESTORS HAVE TO SELL USD TO BUY INR). FINALLY, MAS SEEMS TO BE HAPPY TO LET THE SGD DEPRECIATE MORE AGAINS THE USD, SO THAT ALSO HELPS.
I AM NOT SAYING THAT FX SHOULD BE IGNORED, SIMPLY STATING THAT WITH A 6 - 12 MONTHS VIEW, I AM ACTUALLY QUITE BULLISH ON INR.
(2) ALTHOUGH RHT HEDGES THE DIVIDEND 12 MONTHS FORWARD, IT DOES NOT HEDGE ITS ASSETS (WHICH ARE ALL IN INR). GIVEN THAT INR /SGD IS NOW 45.7 VERSUS AROUND 48 IN JUNE 2014, THE SGD VALUE OF THESE ASSETS HAS ALSO INCREASED AND AS RHT HAS LITTLE DEBT, THE FX LOSSES ARE SMALL.
(3). RHT CURRENTLY HAS VERY LITTLE DEBT (15% GEARING), SO HAS SIGNIFICANT HEADROOM TO ADD MORE DEBT FINANCED ACQUISITIONS WHICH WILL BE VERY ACCRETIVE AND COULD ALLOW THE DIVIDEND TO GROW. THE FACT THAT RHT HAS SET UP AN MTN PROGRAMME LATE LAST YEAR, TO ME, SUGGESTS THAT SOMETHING IS COOKING.
(4) IF YOU STRIP OUT THE HEDGES AND FOCUS ON THE FY 2016 NON-HEDGED YIELD OF 8.1%, RHT IS STILL YIELDING SIGNIFICANTLY MORE THAN FIRST REIT (6.8%) AND PARKWAY LIFE REIT (4.8%). THERE CLEARLY NEEDS TO BE A PREMIUM FOR RHT GIVEN ITS FX EXPOSURE (WHICH THESE OTHER TWO REITS DO NOT HAVE) BUT HOW MUCH ?
I AM NOT CONVINCED ENOUGH TO ADD TO MY POSITION BUT I AM CONVINCED ENOUGH TO KEEP MY CURRENT EXPOSURE WITH A VIEW TO ANOTHER 15 - 20 CENTS UPSIDE
VESTED
(22-01-2015, 06:51 PM)zerobeta Wrote: [ -> ]I just have a few questions on this biz trust:
1) they are currently developing 4 other hospitals... but where do they account these development costs? in their 2Q report, their reported "capex" is merely SGD 445k for the 1H of this year... meanwhile total development costs are estimated at SGD 66 mln!
2) the impact of "non-cash straight lining" (very peculiar item, is this common in India?).... This item as a % of service fees was 12.5% and 14.4% in FY 2014 and FY 2013 respectively... but how come in the 1H2015 it's only 4.4%?
3) the base fee increment is only 3% annually... this is so low compared to average inflation in India... average inflation in the past 5 years is 9.5% and in fact since 1995 (20 years) India has never seen inflation as low as 3%... even during the currently low inflationary period, inflation is still 5% ish... does this imply that the sponsor, being the main lessee of the hospital, try to squeeze them as much as they can?
4) For FY2015, distribution is being hedged at 52.28, for 1H2016 the hedge rate is 50.36... meanwhile the current spot rate is 46.3.... this means for FY2015 we will see DPU dip by 11.4%, lower than it should have been if they have no FX exposure.... is my thinking correct?
Thanks a lot seniors.... honestly I see this company as being very prone to be financially engineered... yield is not attractive for India exposure business...