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2 Things Investors Should Know About First Real Estate Investment Trust Now

First Real Estate Investment Trust (SGX: AW9U), or First REIT, is a healthcare-focused real estate investment trust.

It currently has a portfolio of 20 properties (16 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.

There are two things to know about the REIT right now: its latest financial performance and valuation.

Financial performance

Here is a table showing important items from First REIT’s financial results for the first quarter ended 31 March 2018.

Source: First REIT’s results presentation

For the latest period, gross revenue increased 5.8% to S$28.7 million, mainly due to “contributions from Siloam Hospitals Buton & Lippo Plaza Buton and Siloam Hospitals Yogyakarta, acquired in October and December 2017 respectively, as well as higher rental income from existing properties in Indonesia and Singapore”. Distribution per unit was up by 0.5% largely due to the above reasons, offset by dilution from newly issued units.

As at 31 March 2018, the healthcare REIT clocked in a gearing ratio of 34.1% while its occupancy rate stood at 100%.

In all, First REIT had a good quarter with all metrics performing ahead of the same period last year.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows First REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 42 REITs that are in Singapore’s stock market.

Source: SGX StockFacts (data as of 29 June 2018)

We can see that First REIT’s valuation is at a premium to the market average, both in terms of PB ratio and distribution yield. This suggests that First REIT is not cheap at the moment.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has a recommendation for First Real Estate Investment Trust.