First REIT (FREIT) reported its 4Q11 results which were within our expectations. For FY11, gross revenue increased 78.4% to S$54.0m and was just 0.2% higher than our full-year projection. Distributable income to unitholders rose 105.8% to S$43.9m, in line with our forecast of S$41.9m if we exclude a special S$2.2m distribution in 4Q11. DPU for FY11 was 7.01 S cents, versus 6.63 S cents in FY10, and translates into an attractive yield of 9.1%. We believe that FREIT could acquire new hospitals in FY12. This would likely be debt funded given its ample debt headroom. Maintain BUY with a revised RNAV-derived fair value estimate of S$0.89 (previously S$0.84) as we roll forward our valuations and update our terminal capitalisation rates and Indonesian asset discount rates assumptions.
4Q11 results within expectations. First REIT (FREIT) reported its 4Q11 results which were within our expectations. Gross revenue surged 82.0% YoY to S$13.9m while distributable amount to unitholders jumped 122.9% to S$12.1m. This was partly due to a special distribution of S$2.2m arising from FREIT’s recent divestment of the Adam Road property. For FY11, gross revenue increased 78.4% to S$54.0m and was just 0.2% higher than our full-year projection. Distributable income to unitholders rose 105.8% to S$43.9m, in line with our forecast of S$41.9m if we exclude the special S$2.2m distribution in 4Q11. DPU for FY11 was 7.01 S cents, versus 6.63 S cents in FY10 due to additional distributions from the asset divestment as highlighted earlier and a 5-for-4 rights issue in Dec 2010. This translates into an attractive yield of 9.1%. We think that the remaining S$4.4m from the S$8.7m gain on the divestment could be distributed to unitholders in two tranches in 1Q12 and 2Q12, although usage of these funds would be at the full discretion of FREIT’s Manager.
Acquisitions likely in FY12. Management has reiterated its focus on Indonesia, given rising demand for quality healthcare services there and visibility from the strong pipeline of hospitals from its sponsor Lippo Karawaci. We reckon that any acquisitions in the near term are likely to be debt funded, since FREIT’s gearing ratio of 14.8% (end FY11) provides ample debt headroom of S$89.8m-S$143.4m before reaching its comfortable gearing ratio range of 25%-30%.
Maintain BUY. We opine that FREIT has showcased its resilience amid the current volatile economic environment, underpinned by healthy industry fundamentals and its stable master lease structure. Maintain BUY with a revised RNAV-derived fair value estimate of S$0.89 (previously S$0.84) as we roll forward our valuations and lower our terminal capitalisation rate inputs for some of its properties. We also apply a smaller discount rate to its Indonesian assets given improving fundamentals of the country.
Acquisitions likely in FY12. Management has reiterated its focus on Indonesia, given rising demand for quality healthcare services there and visibility from the strong pipeline of hospitals from its sponsor Lippo Karawaci. We reckon that any acquisitions in the near term are likely to be debt funded, since FREIT’s gearing ratio of 14.8% (end FY11) provides ample debt headroom of S$89.8m-S$143.4m before reaching its comfortable gearing ratio range of 25%-30%.
Maintain BUY. We opine that FREIT has showcased its resilience amid the current volatile economic environment, underpinned by healthy industry fundamentals and its stable master lease structure. Maintain BUY with a revised RNAV-derived fair value estimate of S$0.89 (previously S$0.84) as we roll forward our valuations and lower our terminal capitalisation rate inputs for some of its properties. We also apply a smaller discount rate to its Indonesian assets given improving fundamentals of the country.
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