First Real Estate Investment Trust’s Latest Earnings: What Investors Should Know

First Real Estate Investment Trust (SGX: AW9U) released its fiscal second-quarter earnings report yesterday evening. The reporting period was from 1 April 2015 to 30 June 2015.

First REIT is a healthcare-focused real estate investment trust. Currently, it has a portfolio of 16 properties (12 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. Its sponsor is Indonesia’s largest listed property company, PT Lippo Karawaci Tbk.

You can read more about the REIT in here and here or catch up with its previous earnings report here.

Financial Highlights

The following’s a quick read of First REIT’s latest financial figures:

  1. Gross revenue rose to $25 million in the latest quarter, up about 8.5% from the same quarter a year ago.
  2. Consequently, net property income (NPI) for the quarter also rose by 8.3% year on year from $22.7 million to $24.6 million.
  3. The top-line growth had trickled down to the bottom-line with First REIT’s distribution per unit (DPU) for the reporting quarter coming in at 2.07 cents, a 3.5% increase from the 2 cents seen in the second quarter a year ago.
  4. The latest valuation for the REIT’s properties stands at S$1.17 billion. First REIT ended the reporting quarter with a net asset value per unit of $1.02, up 5% year over year.

Beyond these, Foolish investors might want to keep an eye on a REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarized for First REIT below:

2015-07 First REIT Table

Source: First REIT’s earnings presentation

There aren’t much changes in First REIT’s debt profile compared to the end of last year.

Meanwhile, about 74% of First REIT’s loans will come due between 2017 and 2018. Foolish investors should keep an eye on how the REIT can refinance its loans. In the short term though, there is limited risk from rising interest rates.

Operational highlights

Lippo Karawaci, the sponsor for First REIT as mentioned earlier, has 46 hospitals in its development pipeline which can be acquired by First REIT over time.

Dr Ronnie Tan, Chief Executive Officer of First REIT’s Manager, had the following comments on the quarter’s results:

“I am heartened that the Trust has been able to deliver record DPU quarter after quarter, buoyed by our strategic yield-accretive acquisitions of high quality hospitals over the last few years. First REIT has today, attained assets-under-management of S$1.17 billion, which has grown at a CAGR of 20.1% since our listing in 2006.

Despite the increase in assets, with prudent capital management, the Trust has also managed to keep our gearing at a healthy 32.9%, below the current regulatory limit of 35.0%. The regulatory gearing limit will go up to 45% from next year onwards following recent announcement by The Monetary Authority of Singapore. Moving forward, the Trust will continue to grow our assets to maximise returns to Unitholders, as well as adopt an active and prudent approach with our capital structure”

Despite a lukewarm economy in Indonesia, First REIT expects healthcare spending to be supported by the universal healthcare scheme introduced by the government.

Foolish Summary

First REIT last traded at S$1.42 on Monday. This translates to a historical price-to-book ratio of 1.4 and a distribution yield of around 5.8%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.