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Religare Up As Analysts Initiate Coverage With Upbeat Calls (BT)

Business trust's unit closes at 83 cents, up 4.4% for the week


[Singapore]

RELIGARE Health Trust units made a comeback this week as analysts initiated coverage on the business trust with "outperform" and "buy" ratings.

The unit closed yesterday at 83 cents, up 4.4 per cent for the week, after starting on Monday at 79.5 cents.

DBS Vickers, Standard Chartered and CIMB cited Religare's exposure to a fast-growing Indian healthcare market and strong growth potential as reasons to support their optimistic target prices ranging from 95 cents to 97 cents.

Religare listed on the mainboard on Oct 19 with an initial public offering (IPO) price of 90 cents.

The trust, says DBS Vickers' Andy Sim, is trading around an attractive 10 per cent yield, compared to its peers trading at yields of 6.8-8.4 per cent on the market.

That the trust is backed by parent company Fortis Healthcare, India's No 2 hospital operator by market share, also boosts the analysts' confidence in the stock.

According to market research firm Frost and Sullivan, the Indian healthcare market is estimated to grow at a 15 per cent compound annual growth rate from 2010 to 2015 to US$119.6 billion, driven by rising and ageing population, changing disease profile and growing affluence in the world's second-most populous country.

With the industry outlook already acting in its advantage, analysts expect Religare to further deliver stable and consistent growth, on the back of higher average revenue per bed, higher occupancy, as well as higher bed capacity in both existing assets and its pipeline of greenfield projects.

"Growth is embedded in Religare's portfolio. With 1,782 operational beds as at end-June 2012, its portfolio can ramp up by 79 per cent without expansion, and a further 44 per cent when all stages of development are completed," said CIMB analyst Tan Siew Ling.

Although Religare's unit price is now below its IPO price, DBS Vickers' Mr Sim believes this to be a result of overall weak market sentiment, investors' unfamiliarity with the Indian healthcare market, and concerns of the volatility of the Indian rupee (INR) against the Singapore dollar (SGD).

Two risks analysts cited are uncertainties in regulations in India, given that Religare's assets are concentrated there, as well as fluctuation in the INR/SGD rate.