First REIT Review @ 21 February 2023

Basic Profile & Key Statistics

• Main Sector(s): Healthcare & Hospitality 
• Country(s) with Assets: Indonesia, Singapore & Japan
• No. of Properties (exclude development/associate/fund): 32

Key Indicators

Performance Highlight

Gross revenue, NPI and distributable income improved yoy mainly due to the Contribution from 14 Japan Nursing Homes which were acquired in 2022. DPU has improved slightly as compared to distributable income despite an enlarged unitholder base.

Divestment

IAHCC is being marketed for divestment.

Distribution Breakdown

• Distributable Income Breakdown:
• 91% from Operation
• 9% from Fees Payable/Paid in Units
• Distribution = 99.9% of Distributable Income
• Distribution to Perpetual Securities Holder = 5.7% of Distributable Income

Related Parties Shareholding

• REIT Sponsor's Shareholding: Above median for more than 20%
• REIT Manager's Shareholding: Above median for more than 20%
• Directors of REIT Manager's Shareholding: Above median for more than 20%

Lease Profile

• Occupancy: 100%
• Income in SGD/Major Currencies: Below median for more than 20%
• WALE: Above median for more than 20%
• Highest Lease Expiry within 5 Years: Below median for more than 20%; Falls in 2025
• Weighted Average Land Lease Expiry: Below median for more than 20%

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing ratio including perps: ± 10% from median
• Cost of Debt: Above median for more than 10%
• Fixed Rate Debt %: Below median for more than 20%
• Unsecured Debt %: Below median for more than 20%
• WADM: Above median for more than 20%
• Highest Debt Maturity within 5 Years: Above median for more than 20%; Falls in 2026
• Interest Coverage Ratio: Above median for more than 20%

Diversification Profile

• Top Geographical Contribution: Below median for more than 20%
• Top Property Contribution: Below median for more than 10%
• Top 5 Properties' Contribution: ± 10% from median
• Top Tenant Contribution: Above median for more than 20%
• Top 10 Tenants' Contribution: Above median for more than 20%

Key Financial Metrics

• Property Yield: Above median for more than 20%
• Management Fees over Distribution: Above median for more than 20%; $5.52 distribution for every dollar paid
• Distribution on Capital: Above median for more than 20%
• Distribution Margin: ± 10% from median

Trends

• Uptrend: Property Yield
• Flat: Occupancy
• Downtrend: DPU, NAV per Unit, Interest Coverage Ratio, Distribution on Capital, Distribution Margin

*The 2021 trends for property yield, distribution on capital and distribution margin have been amortized with the straight-line rent which was recognized in 4Q 2021.

Relative Valuation

• P/NAV: Above +1SD for 1y & 3y; Average for 5y
• Dividend Yield: Average for 1y & 5y; Below average for 3y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low Income in SGD/Major Currencies
High REIT Manager's Shareholding	Short Weighted Average Land Lease Expiry
High Directors of REIT Manager's Shareholding	High Cost of Debt
100% Occupancy	Low Fixed Rate Debt %
Long WALE	Low Unsecured Debt %
No Major Lease Expiry within 5 Years	Concentrated Debt Maturity
Long WADM	High Top Tenant & Top 10 Tenants' Contributions
High Interest Coverage Ratio	Non Competitive Management Fees
Low Top Geographical Contribution	DPU Downtrend
Low Top Property Contribution	NAV per Unit Downtrend
High Property Yield	Interest Coverage Ratio Downtrend
High Distribution on Capital	Distribution on Capital Downtrend
Property Yield Uptrend	Distribution Margin Downtrend

Despite an increase in finance costs, First REIT has been able to maintain its DPU payout. However, the NAV per unit has declined due to a reduction in property valuations. Going forward, the management is aiming to have more than 50% of AUM in developed markets by 2027, therefore, capital recycling and acquisition would be expected.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.