Capital Risk
Management
Capital RiskManagement
The Trustee-Manager employs an
appropriate mix of debt and equity for
the financing of the acquisition and
enhancement initiatives of the medical and
healthcare assets in the RHT portfolio.
As at 31 March 2016, RHT has a net debt of
S$164.2 million with a gearing approximately
18%. RHT may increase its borrowings by
S$445.7 million before reaching its internally
set limit of 45% which is in line with the
gearing limits set out under the MAS REIT
guidelines in Singapore, leaving room for
future growth opportunities. A S$500m
Medium Term Note Programme (“MTN
Programme”) was established for RHT in
FY2015.
In view of ongoing and future asset
enhancement initiatives like that for BG
Road CE, Ludhiana CE, FY16 projects and
acquisition of land for the expansion of the
Mohali CE, RHT’s gearing ratio will rise to
approximately 21.9% if the expected capital
expenditures were fully incurred.
Refinancing Risk
During the year, the Trustee-Manager issued
S$60m fixed rate notes at 4.5% for the
repayment of the S$60m DBS facility. RHT
has a weighted average debt maturity
profile of 1.7 years. We believe that
there is minimal refinancing risk with the
establishment of the MTN Programme.
Interest Rate Risks
As at 31 March 2016, around 64% of RHT’s
advantage of the lower cost of borrowings
upon the commencement of operations of
the completed expansion and Greenfield
development projects. RHT does not hedge
currency exposure on the capital due to
the cost of such long term currency swaps
and fluctuation of valuation of underlying
assets which are carried at fair value. The
Trustee-Manager will continue to monitor
the policy and make adjustments if the
prevailing market conditions warrant it.
Liquidity risk
The Trustee-Manager monitors and
maintains a level of cash and cash
equivalents, through a balance between
continuity funding and flexibility through
the use of stand-by credit facilities
against RHT's financial obligations
deemed adequate to meet RHT’s financial
obligations. The Trustee-Manager intends
to retain a portion of RHT’s Distributable
Income, amongst other things, to mitigate
such liquidity risk. The cash generated from
India operations are placed in bank fixed
deposit and mutual funds to maximise
interest income prior to the intended
repatriation.
Distribution Policy
RHT’s current policy is to distribute at
least 90% of its Distributable Income.
The Trustee-Manager has distributed
100% of RHT’s Distributable Income since
its Initial Public Offering. The Trustee-
Manager intends to distribute 95% of its
Distributable Income for the period ending
31 March 2017.
loans and borrowings are exposed to
interest rates risk as they are pegged to
the Singapore Swap Offer Rate ("SOR") and
Indian Base Rate. In view of the current
volatility of the SOR, the Trustee-Manager
issued S$60m fixed rate notes to refinance
an existing S$60m floating rate facility. RHT
has benefit from the decreasing Indian Base
Rate since utilising the Rupee loan during
the year. We will continue to monitor the
cost of entering into interest rate swaps to
mitigate the interest rate risks.
Currency Risk
All of RHT's assets and operations are
currently within India, thereby deriving all
its revenue from India. At the same time,
the distributions to unitholders are paid
in Singapore dollars. In recognition of the
consequential currency risk, Management
has adopted the policy of hedging the
anticipated amount of cash flows coming
from India to Singapore. Distributions are
paid out to unitholders on a semi-annual
basis and forward contracts locking in
the currency conversion rates are entered
into one year before the cash flows are
repatriated from India to Singapore. This
mitigates the risk of any Indian rupee
volatility in the period before income is
repatriated to Singapore.
RHT takes on Rupee borrowings for major
expansion and Greenfield development
projects as natural hedge to the currency
mismatch. Based on its current policy,
RHT will refinance the Rupee borrowings
with Singapore Dollar borrowing to take
OVERVIEW
KEY INDICATORS
Indicator
As at 31 March 2016
Gearing Ratio
18.1%
Interest Coverage Ratio
9.6 times
Percentage of Fixed Rate Debt
36.1%
Effective Weighted Average Cost of Debt
4.88%
Average Hedged Rates
Jun 16
49.58
Dec 16
49.35
1
Interest Coverage Ratio is defined as the ratio between EBITDA divided by Financial Expense including interest capitalized during the year
Healthy INTERESTCOVERAGERATIO
(1)
Ratio (x)
Interest Coverage Ratio ("ICR") (x)
32
24
16
8
0
FY13
FY14
FY15
FY16 YTD
30.1x
27.4x
13.5x
9.6x
006
Religare Health Trust
