First REIT

First REIT: Registered 2Q13 results which was largely in-line. Excluding the gain on divestment of the Adam Road property, of which a portion was paid in 2Q12, and the issuance of 35.5m new units, core distributable income came in at $12.7m (+27% y/y, +9% q/q) and DPU at 1.85¢ (+16% y/y, +6% q/q), bringing 1H13 DPU to 3.59c (+13%). Net property income rose 43% y/y and 15% q/q to $19.7m, largely due to the contributions from four recently acquired properties, namely Siloam Hospitals Makassar (SHMK) and Siloam Hospitals Manado & Hotel Aryaduta Manado (MD Property), Siloam Hospitals Bali (SHBL) and Siloam Hospitals TB Simatupang (SHTS). Contributions from SHBL and SHTS are expected to further boost the REIT’s top-line in 3Q13 as the full impact of their contributions will be realized. Going forward, First REIT remains confident of its prospects, citing the buoyant healthcare growth in Indonesia, while its acquisition pipelines remain strong, with sponsor, Lippo Karawaci having in its pipeline,14 hospitals, to which First REIT has a right-of-first-refusal. Apart from Indonesia, the group will continue to search for more yield-accretive and quality healthcare assets in other parts of Asia, and explore asset enhancement initiatives with existing properties. Barring any unforeseen circumstances, the group does not expect any significant or adverse changes to First REIT’s performance for FY13. Overall, we note that group’s fundamentals remain fairly strong, with gearing ratio at 33.4%, below MAS regulation of 35%, with 64.2% of its lease expiry stretching more then 10 years and its earliest rental renewals at 2017. An advance distribution of 0.99c was paid on June 26. The distributable amount of 0.86c per unit for the period from May 22 to June 30 will be paid on August 29. At current price, First REIT trades at 1.34x P/B with an annualized FY13E yield at 6.1%.