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

Yesterday, First Real Estate Investment Trust REIT (SGX: AW9U) released its 2017 first quarter earnings report.

As a quick background, First REIT is a healthcare-focused real estate investment trust. Currently, it has a portfolio of 18 properties (14 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsor is Indonesia’s largest listed property company, PT Lippo Karawaci Tbk.

You can catch up with the results from the REIT’s previous earnings here.

Financial highlights

The following’s a rundown on some of First REIT’s latest financial figures:

1. Gross revenue rose 2.5% year-on-year to $27.1 million in the reporting quarter.

2. Net property income (NPI) for the first-quarter also increased by 2.5% to $26.9 million.

3. For the reporting quarter, the distribution per unit (DPU) was 2.14 cents, a 1.4% increase from the 2.11 cents paid out in the first quarter of 2016.

4. Total assets under management was valued at around $1.27 billion as of 31 March 2017. The REIT ended the reporting quarter with a net asset value per unit of around $1.01, down slightly from the $1.03 seen a year ago.

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

2017-04-17 First REIT Debt Table
Source: First REIT’s earnings report

The REIT’s total debt decreased slightly to $413 million compared to the end of last year, bringing the gearing ratio down a little to 31% in the process. Given that over 90% of First REIT’s total loans are on fixed rates or hedged, there is limited risk from rising interest rates over the short-term. But, investors should still watch the REIT’s progress in refinancing its borrowings.

Operational highlights

First REIT completed its acquisition of the Siloam Hospitals Labuan Bajo for S$20 million in December 2016. The REIT’s sponsor, Lippo Karawachi, still has over 40 hospitals in its development pipeline which can be acquired by First REIT over time.

Dr Ronnie Tan, the chief executive officer of First REIT’s manager, had the following comments to share on the reporting quarter’s results:

“The 1.4% growth in 1Q DPU was achieved on the back of the full quarter’s rental income contribution from Siloam Hospitals Labuan Bajo (“SHLB”), which was acquired in December 2016. This is our 11th consecutive quarter of DPU growth since 2Q 2014, a testament of our well-tested strategy of acquiring yield-accretive assets. In FY 2017, we will continue to reinforce this strategy to maximise returns to our Unitholders.”

In its earnings release, First REIT also wrote about its market conditions:

“Southeast Asia’s largest economy, Indonesia’s gross domestic product grew 5.02% in 2016, an improvement from 4.88% in 2015. For 2017, International Monetary Fund is forecasting a growth of 5.1%2, driven by government’s reforms and infrastructure developments.

Meanwhile, the healthcare sector remains supported by the ongoing national health insurance scheme, which now allows more affluent Indonesians to supplement coverage under the scheme with private health insurance, lending further weight to private healthcare spending.”

First REIT’s units closed at a price of S$1.34 each yesterday. This translates to a historical price-to-book ratio of 1.33 and a distribution yield of around 6.3%.

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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.