First REIT - Robust operational performance reported by Siloam Hospitals
- We note that PT Siloam International Hospitals Tbk (SIH) recently reported robust operational performance for its FY16 results. We believe this augurs well for First REIT (FREIT), as it owns a number of hospitals being operated by SIH.
- As a recap, besides base rental income from the hospitals, FREIT is also entitled to a variable rent component which is a function of the revenue growth of the hospitals, subject to certain conditions.
- For FY16, SIH saw its gross operating revenue and EBITDA increase by 25% and 17% to IDR5.17t and IDR674b, respectively.
- SIH currently has 23 operational hospitals, three completed hospitals awaiting their operational license, two newly acquired hospitals and 40 future developments. Hence, we believe this provides FREIT with a steady pipeline of potential acquisition targets in the future.
- However, we maintain our HOLD rating and S$1.32 fair value estimate as we see limited upside potential at current price level.