First Reit In focus

ALP REIT INVESTMENT CLUB (22April2016)

First Reit(AW9U)

(22April16) close:S$1.27

12M-Target price:S$1.70

1.) Type of Reit: Healthcare

2.) Countries that the business operates in: 95.4% of its gross revenue was derived from Indonesia.

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3.) Number of property in the portfolio:The Trust capped off FY 2015 with an enlarged portfolio of 17 properties and an 8.5% jump in assets-undermanagement to S$1.27 billion from S$1.17 billion.

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4.) Top 5 properties that generates the highest revenue (Decreasing order): The company did not disclose these information.

5.) Challenges: With the increase of gearing ratio, its interest coverage figure looks increasingly unfavorable. However, the group prudent capital management will likely offset this issue.

6.) Strengths: With prudent capital management, the Trust has also managed to secure 88.6% of their total debt of S$447.6 million as at 31 December 2015, on a fixed rate basis to mitigate future interest rate hikes. Their distribution reinvestment plan (“DRP”), which was launched in 2014, has continued to provide a cost effective way to raise additional funds for repayment of existing loans and for general working capital purposes.

7.) Significant events:Continuing with our acquisition track, on 3 February 2016, the Trust announced our first joint acquisition with Lippo Malls Indonesia Retail Trust for an integrated development in Yogyakarta, Indonesia, from Lippo Karawaci. Upon Unitholders’ approval at an extraordinary general meeting, this latest addition will boost the Trust’s portfolio to 18 properties and strengthen our asset base by 3.15% to S$1.31 billion from S$1.27 billion.

 8.) TABLE:

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9.) Recommendation: Buy. The group achieves stable fundamental with good future prospect. According to BMI Research, annual healthcare expenditure in Indonesia is expected to increase at an average of 10% annually until 2017 to about US$25 billion1 . The projected increase in demand creates a gap in supply, especially in the private healthcare sector. Siloam, the largest and most prominent hospital group in Indonesia, is well-positioned to meet this growing demand for quality private healthcare services. First REIT currently owns 12 hospitals within Siloam’s network of 20 hospitals and their Sponsor continues to present them with strong acquisition opportunities of up to 44 hospitals in the pipeline, to which the Trust has the right-of-first-refusal to acquire. Moreover, the group will also be benefited from Indonesian government plans to lift the ban on foreign ownership in  healthcare-related businesses.  

 COMPILED BY: Chu Cehan

DISCLAMER: Readers should not rely solely on information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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