First REIT - Phillip Securities Research 2016-04-19: No surprises

FIRST REIT FIRST REAL ESTATE INV TRUST AW9U.SI

First REIT - No surprises

First REIT’s 1Q16 DPU increased by 2.4% yoy to 2.11 cents due to additional contributions from the Kupang property acquired last December.

First REIT’s Indonesian hospitals have an annual base rental increment pegged to the Singapore CPI (with a floor of 0% and cap of 2%).
The CPI number came in at -0.6% and - 0.8% for January and February this year.
In MAS’ latest policy statement issued last week, the central bank expects CPI-All Items inflation to stay negative for 2016, dragged down by housing and private transport prices.
Investors should expect flat base rentals for the Indonesian hospitals this year.

First REIT’s gearing stands at c.34% before the Siloam Hospital Yogyakarta (SHYG) acquisition, which is expected to be fully funded by debt and internal cash.
With management’s stated comfortable gearing level at or below 40%, debt headroom will be around S$60m after the SHYG acquisition.
Since 2014, First REIT has typically made acquisitions in the range of S$40m-$70m per year, with 80% or more financed by debt and cash for every acquisition.

We downgrade our call from BUY to ACCUMULATE for First REIT with an unchanged DDM-derived target price of S$1.38, on the back of the recent price appreciation.
First REIT is attractive as a stable yield play for its resilient income with long leases and minimal exposure to SGD/IDR fluctuations.

Dehong Tan Phillip Securities | http://www.poems.com.sg/ 2016-04-19

Phillip Securities SGX Stock Analyst Report ACCUMULATE Downgrade BUY 1.38 Same 1.38