[Recent Buy] Religare Health Trust RF1U

I have been on the lookout to add some good REIT recently. There are two names that I considered namely VIVA Industrial Trust and Religare Health Trust. Both are different types of REITs. While Viva's major asset is a business park and a few others. RHT's focus is on hospitals in India.

1. P/NAV: One key parameter that I look at when I'm buying REIT's is P/NAV. If this ratio is more than 1, that means the REIT is overvalued and I'd be paying more to hold less valued asset. I don't like such a situation. Though at any given time a whole bunch of REITs trade overvalued and there is another bunch that continues to trade undervalued. NAV/share for RHT is estimated around 0.80 cents (price = 0.785 cents) while for VIT it is estimated to be 0.745 (price = 0.765 cents). So, P/NAV (RHT) < 1 and P/NAV (VIT) > 1. RHT 1 VIT 0
2. Dividend Yield: Both of these REITs are fairly new with not even one full year data available. However, analyst estimates say that yields should be around 9% for both of them. This will give my portfolio yield a boost and we can call this round a tie. RHT 1.5 VIT 0.5
3. Gearing (Debt/Assets): For RHT, the net gearing is under 10% while for VIT it is around 38%. It is a clear win for RHT which has an ability to take additional debt and boost shareholder returns further. RHT 2.5 VIT 0.5
4. Dividend Growth: Next I look at the growth prospects for dividend. RHT's returns also depends on the occupancy rates which can fluctuate depending on a number of factors. For VIT, once the occupancy has been attained it would fluctuate less on an individual basis. Though the overall occupancy would be dependent on how the economy is doing. Analysts are expecting business park rents to go up by 9% over the next couple of years. Assuming this is passed on to investors as a boost to dividends, VIT is a winner in this case. For RHT, the additional risk is currency fluctuation. I believe that once Fed starts tapering, USD will strengthen and INR weaken. This might put pressure on RHT's dividends. RHT 2.5 VIT 1.5

There are some other parameters that I look at that haven't been decisive in this case. I was actually inclined to buy both of them. I bought 1000 shares of RHT at 78.5 cents/share for now. I would be looking to buy one lot of VIT as well once P/NAV drops below 1. 9% yield is looking very attractive and I'm happy to hold with slow dividend growth over coming years.

This will be my first REIT purchase and will add around 75 SGD/year in dividend income for the coming year. Dividend distribution is semi-annual for RHT.

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