First REIT’s (FREIT) recent 2Q15 results were within our expectations and exhibited continued stable growth. We project FREIT’s DPU growth to remain steady at 3.0% for FY15 and 1.0% for FY16, and have not factored in any potential acquisitions in our assumptions. Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals and a subsidiary of FREIT’s sponsor Lippo Karawaci, recently reported a solid set of 2Q15 results, with gross operating revenue and EBITDA increasing by 24% and 56% YoY to IDR1,011b and IDR152b, respectively. Lippo Karawaci has been actively developing more hospitals in Indonesia and currently has a strong pipeline of 46 hospitals. This represents strong acquisition opportunities for First REIT given that it has a right-of-first-refusal (ROFR) to Lippo Karawaci’s hospital assets. Despite FREIT’s recent share price correction, we believe it is still too early to turn positive on the stock. Maintain HOLD rating and S$1.36 fair value estimate on FREIT.
Steady growth path
First REIT’s (FREIT) recent 2Q15 results exhibited continued stable growth, with gross revenue and DPU increasing by 8.5% and 3.5% YoY to S$25.0m and 2.07 S cents, respectively. This was in-line with our expectations, and was driven by both organic growth and contribution from new acquisitions. We project FREIT’s DPU growth to remain steady at 3.0% for FY15 and 1.0% for FY16. We have not factored in any potential acquisitions in our assumptions.
Siloam Hospitals delivering good growth
Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals and a subsidiary of FREIT’s sponsor Lippo Karawaci, recently reported a solid set of 2Q15 results. Gross operating revenue jumped 24% YoY to IDR1,011b, while EBITDA accelerated 56% to IDR152b. This was underpinned by the ramp-up of new hospitals and higher inpatient admissions and outpatient visits. The continued weakening of the IDR may also deter Indonesians, especially within the middle-class group, from seeking discretionary medical treatment overseas. This would potentially benefit Siloam’s hospitals.
Strong pipeline of acquisition opportunities
Lippo Karawaci has been actively developing more hospitals in Indonesia and currently has a strong pipeline of 46 hospitals. This represents strong acquisition opportunities for First REIT since it has a right-of-first-refusal (ROFR) to Lippo Karawaci’s hospital assets.
Maintain HOLD
Since we downgraded FREIT to a ‘Hold’ on 21 Jul 2015, its share price has corrected 7.4% to close at S$1.32. Nevertheless, we believe it is still too early to turn positive on the stock, as valuations are not yet attractive, in our view, with the stock trading at a forecasted FY15F and FY16F distribution yield of 6.3%. This is more than one standard deviation below its 5-year average forward yield of 7.3%. Maintain our HOLD rating and S$1.36 fair value estimate on FREIT.
First REIT’s (FREIT) recent 2Q15 results exhibited continued stable growth, with gross revenue and DPU increasing by 8.5% and 3.5% YoY to S$25.0m and 2.07 S cents, respectively. This was in-line with our expectations, and was driven by both organic growth and contribution from new acquisitions. We project FREIT’s DPU growth to remain steady at 3.0% for FY15 and 1.0% for FY16. We have not factored in any potential acquisitions in our assumptions.
Siloam Hospitals delivering good growth
Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals and a subsidiary of FREIT’s sponsor Lippo Karawaci, recently reported a solid set of 2Q15 results. Gross operating revenue jumped 24% YoY to IDR1,011b, while EBITDA accelerated 56% to IDR152b. This was underpinned by the ramp-up of new hospitals and higher inpatient admissions and outpatient visits. The continued weakening of the IDR may also deter Indonesians, especially within the middle-class group, from seeking discretionary medical treatment overseas. This would potentially benefit Siloam’s hospitals.
Strong pipeline of acquisition opportunities
Lippo Karawaci has been actively developing more hospitals in Indonesia and currently has a strong pipeline of 46 hospitals. This represents strong acquisition opportunities for First REIT since it has a right-of-first-refusal (ROFR) to Lippo Karawaci’s hospital assets.
Maintain HOLD
Since we downgraded FREIT to a ‘Hold’ on 21 Jul 2015, its share price has corrected 7.4% to close at S$1.32. Nevertheless, we believe it is still too early to turn positive on the stock, as valuations are not yet attractive, in our view, with the stock trading at a forecasted FY15F and FY16F distribution yield of 6.3%. This is more than one standard deviation below its 5-year average forward yield of 7.3%. Maintain our HOLD rating and S$1.36 fair value estimate on FREIT.
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