First REIT (FREIT) reported a steady set of 1Q17 results which met our expectations. Gross revenue and NPI both rose 2.5% YoY to S$27.2m and S$26.9m, respectively, and formed 24.8% of our FY17 forecasts.

Growth was driven largely by a full-quarter contribution from the acquisition of Siloam Hospitals Labuan Bajo, which was completed in Dec 2016. DPU edged up 1.4% YoY to 2.14 S cents, and was partly boosted by the REIT Manager’s decision to take 92.0% of its management fees in units (1Q16: 70.1%). 1Q17 DPU constituted 25.6% of our fullyear projection.

Looking ahead, FREIT will continue to seek growth from Indonesia as its key focal market. This is supported by its rightof-first-refusal agreement with its sponsor, Lippo Karawaci, over its expanding pipeline of more than 40 hospitals.

Maintain HOLD and S$1.32 fair value estimate on FREIT.

Source: OCBC Research - 18 Apr 2017