First REIT’s Latest Earnings: What Investors Need To Know

First REIT  (SGX: AW9U) released its fiscal second-quarter earnings yesterday evening.

As a brief background, the real estate investment trust has a focus on healthcare-related properties. Currently, First REIT owns 17 properties in total in Indonesia, Singapore, and South Korea. It has a total of S$1.26 billion in assets under management.

With that, let’s take a closer look at First REIT’s latest earnings release.

Some basic numbers

For the quarter, First REIT’s gross revenue increased by 6.5% year-on-year to S$26.6 million. Net property income also rose by a similar magnitude of 6.9% to S$26.3 million. Growth here was mainly driven by First REIT’s December 2015 acquisitions of two assets, Siloam Hospitals Kupang and Lippo Plaza Kupang.

Consequently, distributable income climbed by 5.5% to S$16.2 million compared to the previous year. This led to First REIT’s distribution per unit (DPU) stepping up by 1.9% from the 2.07 Singapore cents seen a year ago to 2.11 cents.

First REIT ended the reporting quarter with a net asset value per unit of S$1.03, a slight 1.2% increase from the same date a year ago.

Financial position

As of 30 June 2016, First REIT’s gearing stood at 34.4%, an increase from 32.9% in the previous year.

Investors might also want to watch First REIT’s refinancing activities. The REIT has nearly 65% of its total debt coming due in 2017 and 2018.

Valuation and Prospects

Looking ahead, First REIT acknowledged a slowdown in Indonesia’s economy (growth in the first-quarter of 2016 was 4.92%, a dip from the 5.04% seen in the fourth-quarter of 2015), but also said that “the healthcare sector is expected to continue to grow steadily with demand supported by the growing aging population and the national health insurance scheme.”

The REIT also mentioned that its sponsor has a “strong pipeline of 43 hospitals for potential acquisition.”

Dr Ronnie Tan, the chief executive of First REIT’s manager, had shared some thoughts in the earnings release on the REIT’s recent issue of perpetual securities. It’s worth noting that the securities could help the REIT lower its gearing. Tan said:

“[T]he Trust recently announced the issuance of our S$60 million subordinated perpetual securities priced at a fixed distribution rate of 5.68% per annum. This exercise will lower our gearing from 34% to 30% as the proceeds raised will be used to reduce our existing loans and thus increase our debt headroom for future acquisition opportunities.”

First REIT’s units closed at a price of $1.30 on Thursday. They carry a price-to-book ratio of 1.26 .

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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 James Yeo doesn’t own shares in any companies mentioned.