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Friday, 31 March 2017

First REIT

31/3/2017
Accumulate:
  • Strong DPU growth - CAGR 14.5%
  • Attractive dividend yield 6.6%
  • Strong fundamentals - 100% occupancy, WALE 10-15 years, healthcare assets
  • Strong growth story - pipeline, future aims, and AEIs
Metrics
  • Last done (as of 31/3/2017): S$1.31
  • AUM: S$1.273bil, CAGR 16.4%
  • Debt: Gearing 31.1%, 70% debt maturing by 2018, 92.3% fixed, Cost of debt 3.67%-4.23%, SGD
  • Occupancy: 100%, WALE 10-15 years, earliest rental renewal in 2021
  • NAV: S$1.01, PNAV 1.267
  • Dividend: 2016 DPU S$0.0847, Dividend yield ~6.6%, CAGR 14.5%
  • NPI CAGR 16%
Operations
  • Healthcare REIT
  • 18 assets - Indonesia: 11 hospitals, 1 integrated hospital & mall, 1 integrated hotel & hospital and 1 hotel & country club • Singapore: 3 nursing homes • South Korea: 1 hospital
  • Indonesia property rental forex volatility mitigated by pegging base rent to SGD
  • South Korea property rental: USD
  • Sponsor Lippo Karawaci - Right of First Refusal (have choice to accept or refuse before 3rd party candidates)
Investment thesis
  • 43 hospitals in the pipeline
  • Aim to scale-up to US$3.5 billion in 5 years
  • 2 potential Asset Enhancement Initiatives (AEIs)
  • Healthy gearing to make acquisitions
Risks
  • Changes in interest rate environment affecting cost of debt
  • Delay in pipeline
  • Sponsor - uncertain plans to “shift their 2 REIT listings in Singapore to Indonesia”. The rationale for the move is to benefit from tax breaks offered by Jakarta. However analyst view it as unlikely
at
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