First REIT continues to announce a stable set of results for the first quarter.[Results here] A distribution of $0.0776 works up to a yield of 2.09% for the first quarter and an annualized yield of 8.4% at the current share price of $0.92.
A note to investors is that for this quarter and the last 2 quarters, they have been distributing a one time gain from the sale of their Adam road healthcare building. Thus the dividend yield is higher. Without those the quarter dividend yield would have been $0.0158, 1.7% and annualized $0.068, 7.4%.
That is still a pretty good yield although the share price have ran up 20%.
Net Debt to Asset remain at 10% making this one of the lowest geared. They can pay off their debts with 2.2 years of their profits if undistributed.
Net Asset Value per share is $0.799 versus a current share price of $0.92. The price to asset value have gotten ahead of itself and does not look that cheap now.
I am speculating a rights issue or a share placement soon. First REIT wants to add 15 hospitals in the next few years and with the share price appreciation, they would have a lower hurdle rate in terms of finding yield accretive assets.
At $0.77, they would have to find assets yielding greater than 8.8% in order to boost the dividend per share. Now they just have to find assets yielding greater than 7.4%
At a low share price, due to the hurdle rate to find yield accretive asset, it is likely that current share holders would be diluted and appears unfair to current investors.
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Ian
Thursday 9th of August 2012
I believe that acquisitions could possibly take place in 2H12, given FREIT’s low leverage ratio of 15.1% and ongoing negotiations with its sponsor Lippo Karawaci over the past few months. As FREIT’s share price is currently trading close to our S$0.97 above the fair value
Drizzt
Sunday 12th of August 2012
above NAV you mean Ian. i find that first reit have always keep their debts low and go for rights issues. it might be more attractive now that they are above NAV to raise it that way. or they can do a placement.
take a look at how this article goes > https://investmentmoats.com/stock-market-commentary/value-investing/share-placements/
James
Saturday 21st of April 2012
I think First REIT has the lowest gearing among all the REITS on SGX. I'll definitely keep this on my watchlist to buy on dips.
Anyway, any idea whats behind the huge run in REITS during the past 1 month?
talesteller
Saturday 21st of April 2012
Hi Drizzt,
Good analysis on the rationale for a rights issue/placement. I am not currently vested but should a rights issue materialize it would probably be a great opportunity to enter. Do post again if it does happen :)
Drizzt
Saturday 21st of April 2012
thanks. nice blog!