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First REIT: Adam Road disposal, Korean Acquisition and 2 Indo hospital contribution

First REIT announced its second quarter results ended 30 June. distributable income jumped 86.5%. This is nothing surprising as contribution from the Mochtar Riady Comprehensive Cancer Centre and Siloam Hospitals Lippo Cikarang.

The DPU this quarter is 1.58 cents. At current price of 83.5 cents, the distribution yield is 1.9%. Annualized that is 7.56%.

The current NAV per share is 78 cents. This means that this is those rare occasion when First is trading above NAV. Does this indicate that it is overvalued or that finally investors are attributing the stock with the right kind of respect?

Gregg, one of my readers did asked why First REIT is distributing 9.8 mil in dividends when the net income is 8.7 mil. A look up the Statement of Distribution shows that First REIT was able to pay out 1.27 mil more due to adjustment for tax purposes. This isn’t the case in FY2010. Is this going to be an ongoing trend? We would have to ask First REIT regarding this.

Korean Acquisition

The upside for First REIT is good. It has a reasonably strong sponsor with a pipeline of hospitals. In addition, they seem to be very cautious about where they put their money.

Their recent foray into Korean have been cautious too. This acquisition is to test and see whether Korean healthcare properties will be able to value add to their current Singapore and Indonesia portfolio.

What I like is that its NPI is 9% and the land tenure is Freehold. The other terms are similar to their other healthcare assets.

The only downside is that it will be paid in USD.

Continues to look good

First REIT have been one of the stable REITs around that receives little fan fare and almost zero coverage from analysts.

Yet I think I will continue to accumulate it. The decision is straight forward. for the past 2 years price have seldom edge below the 50 day EMA and that would be a place to accumulate. It is also where the current NAV lies.

Since the start of the bull run, it has not gone below the 200day EMA. A persistent week of price action below 200 day EMA would be a signal to lighten up.

Disclosure: Author is vested in First REIT

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

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habsb

Tuesday 26th of July 2011

Hello Drizzt

I've started to be a regular reader of your blog, where I always find pretty good information and investment ideas.

I've noticed what might be an error in your divi stock tracker. When I click on Frasers Centrepoint, you display asset data exceeding 15B, thence P/B is just 0.1 (wow!). I've checked on the Financial Times, and assets look ten times lower.

On the other side, I've found a couple companies really undepriced : Lippo Mapletree Indonesia and Fortune. What's your advice on them ?

Keep going your ourstanding blog Sincerely

HABSB

Drizzt

Wednesday 27th of July 2011

hi habsb, i will check the data for FCT later. I double check both Frasers data to make sure it is correct. not sure why it turn out this way.

LMIR and Fortune, looks to have foreign exchange risks, so there may be a premium in investing in them. I was looking intently at LMIR but sadly it moved out of my buy range. Very low gearing but that is how indonesian trust operates. I suppose cost of debt is high over there. Lippo wants to make this trust bigger.

Spencer

Sunday 24th of July 2011

Hi Drizzt; I have also noted that the valuation for Sg property losses near 2mil. What effect it will have going forward if continue... Spencer

Drizzt

Wednesday 27th of July 2011

hi Spencer, the value of property goes up and down, First REIT have valuation increase substantially for its Indonesian hospitals. Give or take some gain some lose but we hope that at the end of the day it goes up.

Then again property valuation is a summation of future earning prospects and Sg property are leasehold so a reduction in NAV is not too surprising

gregg

Saturday 23rd of July 2011

Hi Drizzt,

Please see the below data: Revenue: Q1: $14.57mil Vs Q2: $13.223mil Net income: $12.141mil (exclude the divestment of Adam Road) Vs Q2: $10.883mil

Obviously Gross Revenue and Net income are reducing, hopefully the Sarang Hospital can fill up this gap, otherwise, the chances of getting higher DPU are very slim.

Drizzt

Wednesday 27th of July 2011

hi gregg, you would notice that in Q1 First REIT does also have this Manager's Management Fees Settled in Units added to their available for distribution amount >> http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_057AADCA7D1FB082482578780035D7F3/$file/SGXnet_FY_2011_Q1_20Apr11.pdf?openelement

had this not be available the distribution would have to be substantially less by 10%. adjusting downwards the payout of 1.58 cents by 10% the full year dividend yield at 82 cents is actually only 6.8%

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