First REIT - CIMB Research 2016-01-20: Steadily improving

First REIT - CIMB Research 2016-01-20: Steadily improving FIRST REAL ESTATE INV TRUST FIRST REIT AW9U.SI 

First REIT - Steadily improving 

  • Results in line, led by improvement in topline. 
  • New acquisitions supplemented organic rental uplift to drive revenue expansion. 
  • Earnings growth visibility further boosted by AEI at Siloam Hospitals Surabaya. 
  • Healthy balance sheet with gearing at 34%. 
  • Maintain Add with revised DDM-based target price of S$1.33. 

Results largely in line 

  • FIRT posted 4Q15 DPU of 2.09 Scts, up 2.5% yoy, on the back of 7.4% growth in revenue to S$25.7m. 
  • Net property income improved 7.9% to S$25.4m. 
  • On a full year basis, the trust reported DPU of 8.3 Scts, up 3.1% yoy, thanks to higher revenue. 
  • FIRT recognised an S$24.2m revaluation gain, boosting its BV to S$1.04/unit. 

Topline growth from new acquisitions 

  • The improvement in topline was due to contributions from Siloam Sriwijaya, which it acquired in Dec 14, as well as maiden contributions from Siloam Hospitals Kupang and Lippo Plaza Kupang, both bought in Dec 15. 
  • There was also a marginal improvement in NPI margin, both for 4Q and the full year, due to lower expenses incurred for Sarang Hospital, partly offset by land title renewal costs for an Indonesian property. 

New acquisitions and AEIs to drive growth 

  • In FY16, FIRT’s earnings growth will be underpinned by full-year contributions from Siloam Hospitals Kupang and Lippo Plaza Kupang as well as medium-term benefits from asset enhancements at the Siloam Hospitals Surabaya. 
  • Under a joint arrangement and asset swap with Lippo Karawaci, the latter will build a mixed development comprising a new hospital, a private school, an ancillary mall, a hotel and apartments, to complete by 2019. 
  • FIRT will continue to receive rental income during the course of development. 

Healthy balance sheet 

  • FIRT’s balance remains healthy, with a gearing of 34% and no loan refinancing required in FY16. In the meantime, its rental structure, which has built-in escalation clauses, will continue to underpin its organic growth. 

Maintain Add 

  • We maintain our Add rating, with a revised DDM-based target price of S$1.33 (as we now assume a higher cost of equity of 8.2%). 
  • FIRT offers investors FY16 DPU yield of 7% and total return of c.18%.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2016-01-20
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 1.33 Down 1.48