First REIT (FREIT) reported a stable set of 4Q15 results which met our expectations. Gross revenue and DPU grew 7.4% and 2.5% YoY to S$25.7m and 2.09 S cents, respectively. This was driven by contribution from the acquisition of Siloam Sriwijaya in Dec 2014 and organic growth from its other assets.

For FY15, FREIT’s gross revenue rose 8.0% to S$100.7m, and was 0.2% higher than our forecast. 95.5% of its gross revenue was derived from Indonesia, while Singapore and South Korea contributed 3.7% and 0.9%, respectively.

Full-year DPU came in at 8.3 S cents, representing growth of 3.1% and matched our forecast. FREIT’s gearing stood at 33.7%, as at 31 Dec 2015, with 88.6% of its debt on a fixed-rate basis. Given the increase in the regulatory gearing limit from 35% (for REITs without a credit rating) to 45%, FREIT now has more debt headroom to pursue inorganic growth opportunities ahead.

We maintain our HOLD rating and S$1.36 fair value estimate on the stock.

Source: OCBC Research - 20 Jan 2016