First REIT

[winston]

First REIT: Upgrade to BUY on valuation grounds

We visited five of First REIT’s (FREIT) properties (four hospitals and one hotel and country club) in Indonesia over a two-day period last week.

The hospitals are operated by Siloam International Hospitals (subsidiary of Lippo Karawaci) and are generally well-maintained and equipped with modern medical equipment from international brands such as Siemens and Philips.

Meanwhile, FREIT recently lowered its floating rate exposure from 72% to 46% of its total debt following a refinancing exercise. Its next
refinancing need will only come in 2016.

We believe that FREIT’s sharp share price correction has been overdone, as it has minimal exposure to the volatility in the IDR thanks
to its lease structure.

Hence we upgrade FREIT from Hold to BUY on valuation grounds, with an unchanged fair value estimate of S$1.20. FREIT also offers an attractive forecasted distribution yield of 7.6% in FY13 and 8.3% in FY14.

Source: OCBC

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