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First Real Estate Investment Trust’s 2019 First-Quarter Earnings: What Investors Should Know

First Real Estate Investment Trust (SGX: AW9U) is Singapore’s first healthcare real estate investment trust (REIT). The REIT currently owns 20 properties located in Indonesia, Singapore and South Korea.

On Wednesday, the healthcare REIT announced its financial results for the first quarter ended 31 March 2019. Let’s take a look at its latest performance.

Financial highlights

Gross revenue for the reporting quarter came in at S$28.6 million, a slight fall of 0.2% from S$28.7 million a year ago. The decline was largely due to a lower variable rental component for its Indonesia properties.

Property operating costs ballooned 114.8% to S$623,000 on the back of “higher property expenses incurred for Sarang Hospital and Indonesia properties”. Sarang Hospital is in South Korea and is managed by a private doctor. With the higher property operating expenses, net property income fell 1.4% to S$28.0 million.

The distributable amount, however, inched up by 0.9% to S$17.1 million while distribution per unit (DPU) was flat at 2.15 Singapore cents. The following chart shows distributable amount and DPU changes since the first quarter of 2013:Source: First Real Estate Investment Trust 2019 first-quarter earnings presentation

Balance sheet strength

As of 31 March 2019, First REIT’s gearing was 34.5%, below the regulatory limit of 45%. The REIT’s weighted average debt maturity stood at 2.16 years, with the debt maturity profile well-spread out.Source: First Real Estate Investment Trust 2019 first-quarter earnings presentation

Details of refinancing have been finalised for the S$100 million term loan facility due this year, and First REIT’s manager is awaiting approval from the relevant banks.

The REIT’s net asset value per unit dropped from S$1.0251 at the end of last year to S$1.0227 as of 31 March 2019.

Looking ahead

As for its growth plans, Victor Tan, chief executive of Bowsprit, First REIT’s manager, said:

“Going forward, the Trust will continue to explore opportunities to unlock the value of our existing portfolio through asset enhancement initiatives or strategic divestment of assets for capital gains. With OUE Limited (“OUE”) and OUE Lippo Healthcare Limited (“OUELH”) on board, we will also look at diversifying our income streams by expanding into other geographical markets.”

OUE Lippo Healthcare Ltd (SGX: 5WA) and OUE Ltd (SGX: LJ3) together acquired a 100% stake in Bowsprit. With that, OUE Lippo Healthcare joined PT Lippo Karawaci Tbk as First REIT’s co-sponsor.

First REIT’s units are currently selling at S$0.99 each. At that price, the REIT is going at a price-to-book ratio of 0.97 and a distribution yield of 8.7%.

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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.