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A Clean Bill of Health at First REIT

First reit logo Singapore’s first healthcare real estate investment trust (REIT) with properties in Indonesia, Singapore and South Korea, First REIT (SGX: AW9U), is in the pink of health as seen from its latest quarter results.

For the third quarter that ended on 30th September 2013 (3Q 2013), it saw a 60.7% surge in gross revenue to S$22.8 million over the previous year. The net property income grew 53.4% year-on-year to S$21.7 million. The growth was mainly attributable to the full quarter contributions from the four newly acquired properties – Siloam Hospitals Makassar, Siloam Hospitals Manado & Hotel Aryaduta Manado, Siloam Hospitals Bali and Siloam Hospitals TB Simatupang.

The distributable amount went up 30.4% to S$13.8 million and the distribution per unit (DPU) increased 16.7% to 1.96 Singapore cents for the latest quarter as compared to the previous year.

As at 30 September 2013, the gearing ratio stood at 32.9% (33.4% as of 30 June 2013). As First REIT does not have credit rating from the rating agencies, it cannot gear up beyond 35%, as stipulated in the guidelines issued by the Monetary Authority of Singapore. The gearing ratio of another healthcare REIT listed in Singapore, Parkway Life REIT (SGX: C2PU), is at 31.2% as of 30 June 2013. With all things being equal, Parkway Life REIT is a less risky trust.

First REIT has no refinancing needs until 2016, after having secured a four-year S$92 million fixed-rate term loan facility in August 2013, to refinance the existing loans due in November 2013 and January 2015.

First REIT, whose portfolio consists of 14 properties located in Indonesia, Singapore and South Korea, is searching for more yield-accretive and quality healthcare assets in other parts of Asia to expand its footprint. It is also looking into asset enhancement initiatives with existing properties such as Siloam Hospitals Surabaya, Siloam Hospitals Kebon Jeruk and Imperial Aryaduta Hotel & Country Club.

Dr Ronnie Tan, the Chief Executive Officer of Bowsprit Capital Corporation Limited, the manager of First REIT, commented, “We are pleased to see the full impact of the contributions from our four newly acquired properties this quarter which has further boosted the Trust’s gross revenue and net property income, in addition to the steady stream of income from our existing assets. Going forward, we are exploring potential asset enhancement initiatives with three of our properties in Indonesia. This will further enhance our income stream and maximise returns to our unitholders.”

So far this year, First REIT has gained 6.1% while the benchmark index, FTSE Straits Times Real Estate Investment Trust Index (SGX: FSTAS8670), has lost 4.1%.

First REIT last traded at S$1.125. With the net asset value per unit at S$0.9055, the price-to-book ratio translates to 1.2. The distribution yield is at 6.5%, taking into account the latest declared DPU and the past three quarters’ DPU.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.