First REIT Review @ 31 May 2022

Basic Profile & Key Statistics

• Main Sector(s): Healthcare & Hospitality 
• Country(s) with Assets: Indonesia, Singapore & Japan
  
• No. of Properties (exclude development/associate/fund): 31

Performance Highlight

The higher rental income and NPI are mainly due to straight-line rental adjustment and 1 month contribution from the newly acquired Japan nursing homes. Distributable income has improved yoy with DPU increased slightly due to enlarged unitholder base. 

Acquisition

On 1st March, First REIT completed the acquisition of 12 Japan nursing homes through the issuance of consideration units.

Divestment

On 18th May, First REIT announced the divestment of Siloam Hospitals Surabaya at close to the appraised value. The pro-forma DPU would be 2.28 cents (a drop from 2.61 cents based on FY2021), NAV per unit would be declined from 36.65 cents to 36.48 cents and the gearing ratio would be reduced from 33.6% to 32.6%, assuming Relevant Settlement Amount will be used to pare DOWN S$ 19 mil loan.

Related Parties Shareholding

• REIT sponsor's shareholding: Above median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

• Occupancy: 100% 
• Income in SGD/Major Currencies: Below median for more than 20%
• WALE: Above median for more than 20%
• Highest lease expiry within 5 years: Below median for more than 20%; Falls in 2025
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: ± 10% from median
• Gearing ratio including perps: ± 10% from median
• Cost of debt: Above median for more than 20%
• Fixed rate debt %: Below median for more than 20%
• Unsecured debt %: 0%
• WADM: Below median for more than 20% (± 10% from median for post-issuance of bond, 2.44 years)
• Highest debt maturity within 5 years: Above median for more than 20%; Falls in 2023
• Interest coverage ratio: Above median for more than 20%

Diversification Profile

• Top geographical contribution: Below median for more than 20%
• Top property contribution: Below median for more than 10%
• Top 5 properties' contribution: Below median for more than 10%
• Top tenant contribution: Above median for more than 20%
• Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

• Property yield: Above median for more than 20%
• Management fees over distribution: Above median for more than 20%; $4.46 distribution for every dollar paid 
• Distribution on capital: Above median for more than 10%
• Distribution margin: Below median for more than 10%

Trends

The 2021 trends for property yield, distribution on capital and distribution margin have been amortized with the straight-line rent which was recognized in 4Q 2021.

• Uptrend: Property Yield
• Downtrend: DPU, NAV per Unit, Interest Coverage Ratio, Distribution on Capital, Distribution Margin

Relative Valuation

• P/NAV: Average for 1y & 3y; Below average for 5y
• Dividend Yield: Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Income in SGD/Major Currencies
High REIT Sponsor's Shareholding	Short Weighted Average Land Lease Expiry
High REIT Manager's Shareholding	High Cost of Debt
High Directors of REIT Manager's Shareholding	Low Fixed Rate Debt %
100% Occupancy	0% Unsecured Debt
Long WALE	Concentrated Debt Maturity
No Major Lease Expiry within 5 Years	High Top Tenant & Top 10 Tenants Contributions
High Interest Coverage Ratio	Non-Competitive Management Fees
Low Top Geographical Contribution	DPU Downtrend
Low Top Property & Top 5 Properties Contributions	NAV per Unit Downtrend
High Property Yield	Interest Coverage Ratio Downtrend
High Distribution on Capital	Distribution on Capital Downtrend
Property Yield Uptrend	Distribution Margin Downtrend

In December 2021, First REIT announced the "2.0 Growth Strategy" which FIRST REIT has executed a few of it namely, acquisition of Japan nursing homes, entered into settlement agreements for Terminated Development Works Agreement with PT Saputra Karya, and issuance of social bond guaranteed by Credit Guarantee and Investment Facility (CGIF).

For the settlement agreements, First REIT is expected to receive S$ 30.6 million by 30 June.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage due to the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.