First REIT - CIMB Research 2018-01-19: Boost From New Properties

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FIRST REAL ESTATE INV TRUST AW9U.SI

First REIT - Boost From New Properties

• FIrst REIT's FY17 DPU of 8.47 Scts was in line with expectations, making up 100.3% of our FY17 forecast.
• Earnings growth momentum remained driven by new acquisitions.
• Healthy gearing of 33.6%.
• Maintain HOLD with a slightly higher target price of S$1.44.

Results boosted mainly by new acquisitions 

• First REIT (FIRT) reported a 5.8% rise in 4Q17 gross revenue to S$28.6m, boosted largely by contributions from new hospital acquisitions, Siloam Hospital Labuan Bajo (in Dec 16), Siloam Hospital Buton and Lippo Plaza Buton and Siloam Hospitals Yogjakarta in Oct 17 and Dec 17 respectively. 
• Distribution income of S$16.8m, +1.6% y-o-y, translates into a DPU of 2.15 Scts (+0.9% y-o-y). For FY17, DPU came in at 8.47 Scts, +1.2% y-o-y. 
• The REIT revalued up its portfolio by S$13.4m, resulting in a slightly higher NAV of S$1.0147/unit.

Earnings growth m-o-mentum from new acquisitions 

• Looking ahead, we expect earnings to continue to grow on the back of a full year’s contributions from purchases made in 2017, such as Siloam Hospital Buton and Lippo Plaza Buton as well as Siloam Hospital Yogyakarta. These properties should add an estimated S$5.3m in annual revenue or c.5% to topline of the trust.

Strong balance sheet; more headroom for new acquisitions 

• In FY17, the trust expanded its asset base by 6.3% to S$1.35bn through 2 new acquisitions. This will allow First REIT more capital management flexibility to pursue future yield-accretive acquisitions. 
• Apart from low gearing of 33.6%, First REIT had also secured up to S$400m in syndicated secured financing facilities, which can be used to partially refinance outstanding loans and to fund future purchases. It has a right of first refusal to a healthy pipeline of around 40 hospitals from its Sponsor.

Maintain HOLD rating 

• We tweak our FY18-19 DPU estimates post the results and introduce our FY20 projections. Consequently, our DDM-based target price is raised to S$1.44, after rolling forward our assumptions. 
• First REIT is currently trading at 6.4% FY18F DPU yield and 1.38x P/BV. We retain our HOLD rating for now. 
• Upside risk to our call may come from additional acquisitions while downside risk could include slower inorganic growth momentum.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2018-01-19

CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 1.44 Up 1.390