Case Study on First REITs (SGX: AW9U)

Date: 22 October 2018

In the recent quarter, gross revenue rose 5.1 per cent to $29.24m, while net property income rose 5.4 per cent to S$28.94 million, lifted by contributions from recently acquired Siloam Hospitals Buton & Lippo Plaza Buton, Siloam Hospitals Yogjakarta (SHYG), as well as existing properties.

First REIT have increased their distribution per unit (DPU) by 0.5 per cent year-on-year to 2.15 cents (payable on 29th November 2018), bringing 9M18 pay-out to 6.45 cents.

A regional broker has upgraded First REIT to Buy (previously Hold) with TP of $1.36. Key upside catalysts include attractive valuations and potential accretive new acquisitions, while downside risks include possible overhang over Lippo Karawaci's remaining stake in the trust.

Let’s look at how First REIT is scoring based on ShareInvestor’s grid:

Due to the nature of REITs that they cannot retain earnings, it is naturally a good asset class to diversify your portfolio and collect dividends. With that, let’s evaluate the yield

Peer Comparison

Further insight to how First REIT is performing against the industry, local and global peers at one glance.


Ownership

OUE Lippo Healthcare's (OUELH) non-interested directors are recommending that shareholders approve an acquisition of stakes in First Real Estate Investment Trust. They announced their plan to buy in First REIT for S$102.7 million. Post-transaction, OUE/OUELH will own 60/40 per cent of Bowsprit, and OUELH and Lippo Karawaci will each have 10.63 per cent stake in First REIT.

On outlook, private healthcare demand in Indonesia will continue to be supported by the growing adoption of national health insurance scheme and strong GDP growth although it faces FX headwinds from a depreciating rupiah amid rising US interest rates and fears of emerging market contagion.

First REIT has built a track record of delivering growth in revenue and distributable income over the last decade. Moving forward, the REIT has laid a firm foundation to maintain its growth with its lease agreements and planning for potential acquisitions in the future.

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Happy investing!

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