CIMB is keeping its “add” call and target price of $1.48 on First REIT, on Q315 numbers that came in within expectations. The REIT, which owns hospitals in Indonesia, posted a 6.2% y-o-y increase in distributable income to $15.6 million. Distribution per unit was 2.08 cents.
CIMB likes First REIT for its “strong and visible” inorganic growth prospects, as there is a busy pipeline of more than 40 hospitals now under its sponsor, Lippo Karawachi, which the REIT can potentially acquire down the road.
The REIT’s current gearing of 32.9% means it has an additional room to take on $216 million in debt to fund acquisitions before hitting the revised limit of 45%. Meanwhile, First REIT has already started on so-called asset enhancement initiatives to boost the value of its properties. “We believe that potential yield accretive acquisition from its sponsor as well as asset enhancement activities will act as strong rerating catalysts,” states CIMB in its Oct 14 report.
In its separate report today, OCBC is slightly more cautious. It maintains its “hold” call and target price of $1.36 on First REIT. “Valuations do not appear compelling at this juncture, in our opinion, with the stock trading at a forecasted FY15F and FY16F distribution yield of 6.2%. This is more than one standard deviation below its 5-year average forward yield of 7.3%,” states OCBC.
Indonesia’s broader economic challenges are also a cause of concern. “The silver lining is the downside revenue protection inherent in the lease structure,” adds OCBC.
As at 10.30am, First REIT was up one cent to trade at $1.35.
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CIMB likes First REIT for its “strong and visible” inorganic growth prospects, as there is a busy pipeline of more than 40 hospitals now under its sponsor, Lippo Karawachi, which the REIT can potentially acquire down the road.
The REIT’s current gearing of 32.9% means it has an additional room to take on $216 million in debt to fund acquisitions before hitting the revised limit of 45%. Meanwhile, First REIT has already started on so-called asset enhancement initiatives to boost the value of its properties. “We believe that potential yield accretive acquisition from its sponsor as well as asset enhancement activities will act as strong rerating catalysts,” states CIMB in its Oct 14 report.
In its separate report today, OCBC is slightly more cautious. It maintains its “hold” call and target price of $1.36 on First REIT. “Valuations do not appear compelling at this juncture, in our opinion, with the stock trading at a forecasted FY15F and FY16F distribution yield of 6.2%. This is more than one standard deviation below its 5-year average forward yield of 7.3%,” states OCBC.
Indonesia’s broader economic challenges are also a cause of concern. “The silver lining is the downside revenue protection inherent in the lease structure,” adds OCBC.
As at 10.30am, First REIT was up one cent to trade at $1.35.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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