First REIT (FREIT) reported a steady set of 1Q16 results which met our expectations. Gross revenue grew 7.1% YoY to S$26.5m and this made up 25.7% of our FY16 forecast. Growth was largely driven by a full quarter of contribution from Siloam Hospitals Kupang & Lippo Plaza Kupang which was acquired in Dec 2015. DPU rose 2.4% to 2.11 S cents and accounted for 25.2% of our full-year projection.

FREIT’s balance sheet remains healthy, with a gearing ratio of 34.1%, as at 31 Mar 2016. Looking ahead, management will continue to source for acquisition opportunities within the expanding healthcare sector, supported by a visible pipeline of 44 hospitals from its sponsor, PT Lippo Karawaci Tbk, of which it has a right-offirst-refusal. We maintain our HOLD rating and S$1.36 fair value estimate on FREIT.

Source: OCBC Research - 19 Apr 2016