Wednesday, January 20, 2016

First REIT

First REIT’s 4Q15 results were largely in line, as DPU climbed 2.5% y/y to 2.09¢ on a firmer distributable income of $15.7m (+5%). This brought full year distribution to 8.3¢, meeting 97.6% of consensus estimate.

Revenue and NPI rose to $25.7m (+7.4%) and $25.4m (+7.9%) respectively, mainly due to contributions from Siloam Sriwijaya, and maiden contribution from Siloam Hospitals Kupang & Lippo Plaza Kupang (Kupang Property), which was acquired in Dec ’15.

NPI margin inched up 0.4ppt to 98.8% on a 20% decrease in property operating expenses amid lower costs incurred for Sarang Hospital, but partially offset by land title renewal costs for an Indonesia property.

Aggregate leverage crept up 0.9ppt to 34% from 2014 and it has debt headroom of $144m before reaching the 45% cap imposed by the new REIT regulations. The REIT has no refinancing needs until 2017.

Going forward, the healthcare landlord is expected to receive a boost in revenue from the newly acquired Kupang Property and asset enhancement initiatives at Siloam Hospitals Surabaya.

In addition, the REIT sees more acquisition opportunities in Indonesia as it expects growth in the Indonesian healthcare market to remain resilient despite woes surrounding regional economies, and its sponsor, PT Lippo Karawaci has continued to expand its healthcare footprint in the country.

First REIT is currently trading 1.2x P/B and offers an annual distribution yield of 7%.

Latest broker ratings:
CIMB maintained Add but cuts TP to $1.33 from $1.48
OCBC maintained Hold with TP of $1.36

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