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Latest Earnings From First Real Estate Investment Trust: More Growth Ahead Reported

First Real Estate Investment Trust (SGX: AW9U) released its first-quarter earnings yesterday evening for its fiscal year ending 31 December 2016.

The real estate investment trust, which has a focus on healthcare-related real estate, currently owns 17 properties in total in Indonesia, Singapore, and South Korea.

With that brief background, let’s dive into First REIT’s latest earnings to see how it has performed.

Financial highlights

Here are some of the latest important income statement figures from First REIT:

  • For the reporting quarter (three months ended 31 March 2016), gross revenue increased by 7.1% year-on year to S$26.50 million.
  • The increase in revenue flowed through to net property income (NPI), which grew 8.1% from S$24.2 million a year ago to S$26.2 million.
  • The REIT’s distributable amount rose 6% – in tandem with NPI and revenue – from S$15.2 million in the first-quarter of 2015 to S$16.2 million.
  • This led to a 2.4% hike in First REIT’s distribution per unit (DPU) to 2.11 Singapore cents for the reporting quarter.

The increase in First REIT’s gross revenue came mainly from a full quarter’s worth of contribution from Siloam Hospitals Kupang and Lippo Plaza Kupang which were acquired in December 2015. NPI growth came in higher than gross revenue’s due to a 42% year-on-year decline in property operating expenses.

As of 31 March 2016, First REIT had a gearing ratio (total debt divided by total assets) of 34.1%, a slight increase from the 32.6% seen in the same quarter a year ago. For perspective, First REIT’s gearing still has some ways to go before it hits the 45% limit that has been set by the regulators.

First REIT ended the reporting quarter with a net asset value per unit of S$1.03, up slightly from the S$1.02 seen during the same period last year.

Business highlights

Dr Ronnie Tan, the chief executive of First REIT’s manager, had shared the following comments regarding the REIT’s recent acquisitions and future pipeline and what effects they might have on the REIT:

“This is First REIT’s seventh consecutive rise in DPU since achieving our record DPU of 2.00 Singapore cents in 2Q 2014. The growth was achieved on the back of new acquisitions, specifically from our latest acquisition in December 2015, the Kupang Property, comprising Siloam Hospitals Kupang and Lippo Plaza Kupang. The Trust will continue to look for yield-accretive acquisitions to maximise returns to our Unitholders, especially from our Sponsor, PT Lippo Karawaci Tbk., which has a visible strong pipeline of 44 hospitals.

In addition, the Trust has recently announced our proposed joint acquisition of an integrated development in Yogyakarta, with Lippo Malls Indonesia Retail Trust. With the completion of this acquisition, Unitholders can look forward to continuing DPU growth.”

Regarding First REIT’s outlook, the trust commented that recent plans were unveiled by the Indonesian government to loosen restrictions on foreign ownership of businesses in healthcare, among other sectors. First REIT thinks that the move is “expected to further spur the expansion of the healthcare sector, which is already seeing increasing demand for healthcare services and hospital beds with the introduction of Jaminan Kesehatan Nasional, the national health insurance scheme by the Indonesian government since 2014.”

The REIT also mentioned in the earnings release that it has a right-of-first-refusal for the 44 hospitals that are owned by PT Lippo Karawaci.

First REIT’s units closed at a price of S$1.25 on Monday, which translates into a price-to-book ratio of 1.2 based on the latest book value per share. The REIT also has an annualised distribution yield of 6.8%.

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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 Esjay does not own shares in any companies mentioned.