• 1Q15 DPU rose 3.5% YoY
• Robust results from Siloam Hospitals
• Indonesia the focal point

1Q15 results in-line with our expectations

First REIT (FREIT) posted its 1Q15 results which turned out to be in-line with our expectations. Gross revenue jumped 10.1% YoY to S$24.7m, driven by stable organic growth and a fullquarter of contribution from Siloam Sriwijaya which was acquired in Dec 2014. This formed 24.6% of our S$100.5m FY15 forecast.

NPI grew 9.3% to S$24.2m, a slightly slower pace than topline as higher property operating expenses were incurred due to Sarang Hospital, property tax, insurance and building audit fees. DPU for the quarter came in at 2.06 S cents. This represented a YoY growth of 3.5% and constituted 24.8% of our full-year projection.

Siloam Hospitals reported strong results

Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals and a subsidiary of FREIT’s sponsor Lippo Karawaci, recently reported a robust set of FY14 results at the end of last month. Gross operating revenue increased by 33% to IDR3,341b, while EBITDA accelerated 56% to IDR466b. This was underpinned by continued traction in demand for quality healthcare services throughout Indonesia. Operationally, Siloam International Hospitals registered a solid 34% and 24% jump in its inpatient admissions and outpatient visits, respectively.

Maintain BUY

Looking ahead, we expect FREIT to maintain its core focus on the Indonesian healthcare market, given the favourable demand and supply dynamics, rising middle-class population and healthy pipeline of potential acquisition targets from Siloam International Hospitals.

FREIT will also explore asset enhancement initiatives over the next few years for the following assets: Siloam Hospitals Surabaya, Siloam Hospitals Kebon Jeruk, and Imperial Aryaduta Hotel & Country Club. Given this in-line set of results, we maintain our projections on FREIT. The stock is currently trading at 5.8% FY15F distribution yield.

Maintain BUY and S$1.50 fair value estimate on FREIT.

Source: OCBC Research - 15 Apr 2015