First Real Estate Investment Trust (SGX: AW9U) is Singapore’s first healthcare real estate investment trust (REIT). It currently owns 20 properties — mainly hospitals and nursing homes — that are located in Indonesia, Singapore, and South Korea.
After the stock market closed on Tuesday (16 October), First REIT announced its financial results for the third quarter of 2018.
Gross revenue for the reporting quarter grew 5.1% year-on-year to S$29.2 million while net property income improved by 5.4% to S$28.9 million. Contributions from the latest acquisitions of Siloam Hospitals Buton, Lippo Plaza Buton, and Siloam Hospitals Yogyakarta played a role in driving growth; the three properties were acquired in the fourth quarter of 2017. First REIT’s existing properties also had a part to play in producing the higher revenue and net property income.
Distributable amount for the quarter rose 1.4% to S$16.9 million, and this resulted in a 0.5% increase in First REIT’s distribution per unit to 2.15 Singapore cents.
As of 30 September 2018, First REIT’s gearing was 34.9%, a safe distance from the regulatory gearing limit of 45% imposed by the Monetary Authority of Singapore. The REIT’s net asset value per unit stood at S$1.0097 at the end of the reporting quarter, up slightly from S$1.0061 a year ago.
First REIT said that Indonesia’s private healthcare demand would continue to be supported by the growing nationwide adoption of the country’s national health insurance scheme. Healthcare spending in Indonesia is expected to increase by 11.7% annually from 2017 to Rp 1,224 trillion by 2027. As such, First REIT could be well-positioned to ride on the healthcare growth trend in the country. It has the right of first refusals (ROFRs) on a strong pipeline of hospitals in Indonesia from its sponsor, PT Lippo Karawaci, a large property conglomerate in the country.
First REIT could also enjoy ROFRs on OUE Lippo Healthcare Ltd’s (SGX: 5WA) portfolio of healthcare and/or healthcare-related assets in China, Japan, and Southeast Asia in the near future. OUE Lippo Healthcare recently announced that it would acquire a 10.63% stake in First REIT, along with a 40% stake in First REIT’s manager, Bowsprit Capital Corporation Limited.
The Foolish takeaway
First REIT has once again posted a commendable set of results. It also has potential for growth in the years ahead with the expanding Indonesian healthcare sector, and the ROFRs on the healthcare properties under OUE Lippo Healthcare and Lippo Karawaci. The ROFRs could significantly increase First REIT’s geographical catchment within Asia. First REIT ended Tuesday with a unit price of S$1.18, translating to a price-to-book ratio of 1.17 and a trailing distribution yield of 7.3%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of First Real Estate Investment Trust. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.