First REIT’s (FREIT) 1Q18 results were within our expectations. Both gross revenue and NPI grew 5.8% YoY to S$28.7m and S$28.4m, respectively, forming 24.2 – 24.3% of our fullyear forecasts.

These were mainly the result of new acquisitions from Siloam Hospitals Buton & Lippo Plaza Buton and Siloam Hospitals Yogyakarta, acquired in Oct and Dec 2017, respectively, as well as higher rental income from existing properties.

Finance cost saw a 10.7% YoY increase, due mainly to higher loan amounts drawn down for the financing of the latest two acquisitions, as well as the second progress payment for the development of the new Siloam Hospitals Surabaya in 3Q17.

1Q18 DPU increased by 0.5% to 2.15 S-cents, which comprises 24.6% of our full-year forecast. FREIT’s gearing remains healthy at 34.1% as at 31 Mar 2018, though this has edged up slightly from 33.6% as at 31 Dec 2017.

Pending a call with management later, we maintain our BUY rating but place our fair value estimate of S$1.48 under review.

Source: OCBC Research - 18 Apr 2018