Monday, December 18, 2017

Will this be your FIRST REIT to get?

FIRST REIT is the another Indonesia REIT listed on SGX other than Lippo Mall Trust and they have the same sponsor. It has 19 properties across Indonesia, Singapore & South Korea . It pays out dividends quarterly. The sponsor of LMIR trust, PT Lippo Karawci Tbk is also the Indonesia's largest listed company which include urban development, large scale integrated real estate, hospitals, retail malls, hotels and asset management.

Let take a look how First REIT performance since listing.
Constant growth in Asset Size



Steady growth in Quarterly DPU & Distributable amount


Return of First REIT against STI
 Overall, they are able to grow in AUM which allow them to have steady growth in quarterly DPU & distributable amount. It has better performance as compared to STI index.1

 Recent highlight
-Announce joint venture with Lippo Mall Trust to acquire the Yogyakarta Property where they acquire hospital component

Using Swot analysis.

Strength
-Good management
Ability to constant growth in AUM which allow them to have steady growth in quarterly DPU & distributable amount
-Diversify
Their assets are located not just in Jakarta but diversified over different part of Indonesia. This will help to mitigate their risks.
-Strong sponsor
Having the support of its Sponsor which can continue to provide a pipeline of retail assets. They have the right of first refusal to LK's healthcare properties. They are around 31 hospitals under Siloam hospitals network and around 40 hospitals in the pipeline. Furthermore, they are nationally and internationally accredited.2
-Triple net lease
The lessee will bear all operating cost of maintenance, insurance and certain taxes which help in creating a steady and predictable income stream.4
-Stable long term master lease
Indonesia properties rental Forex volatility mitigated by pegging base rent to SGD with annual base rental escalation (2x percentage increase of Singapore CPI, capped at 2%) and variable rental growth component as function of total growth revenue of Indonesia asset.
Singapore rental is in SGD while Korea is pegged to USD. Both of them have annual increment of 2%.4

Weakness
-Shortage of doctor
With growing population in Indonesia and low ratio of doctor to number of people, it can be a potential problem. Furthermore, the salary of doctors are better paid in other countries which might lead them to go oversea.

Opportunities 
-Aging population
Aging population is an issue especially with developing countries especially due to the increase in life expectancy. For Singapore, Older Singaporeans is to double by 2030.3 More facilities and nursing home has to build in order to cater for aging population.
-Diversify into oversea market
They can also further diversify into countries other than Indonesia, Singapore and Korea.
-Low gearing ratio which is below 45% allows more acquisition.1
Through acquisition, the yield can further go up.
-Partnership with Lippo Mall trust
Allow them to acquire asset which has mixture of retail and healthcare

Threats
-Change in local regulation
Any change in local regulation might affect the management of the REIT especially with the land lease.
-Risking interest rate
FED is raising interest rate and any faster pace of raising interest rate,

Currently, I do not hold any First REIT but I believe in its ability to grow. It is not a call to buy or sell, please do your own due diligent. If you have any idea to share, feel free to voice out.


Information is gather from latest financial report.
2 Information from the report in Macquarie APAC ELC - New York