First REIT

[stilicon]

hi OE2008,
You are right, when in correction mode, everybody will get punished. Meanwhile, I think that reits like First Reit with low debt leverage, a decent P/B ratio at about 0,85 and a stable 8%+ div net, should do fine in a 6-12 months time frame.
I erased my previous long post, because I feel I understood that for the 3 indonesian hospitals, the property rights start at 2002 and are good for 30 years only, which should explain part of the negative LT growth rate implied in the present valuation or the S$1,08 CIMB TP.
Nevertheless, I intend to buy this REIT on further correction.
By doing so, I bet that the low interest rate environment will still prevail for some times, before the final inflation monster eat all of us !

[Blackjack]

Hi stilicon, I'm vested as well, but I think let's not forget the traditional discount attributed to Indonesian reits... At this level think some level of optimism in its stability may have already rubbed off. There was also not much acquisitions till date which I felt they could have taken advantage of in view of their low leverage, which was one of the stronger reasons I bought into this reit initially.

Just my feel.

[Aspellian]

When the bear market runs its course, it will be like the police raiding a brothel. The innocent piano player will also be taken down and given a rough time. Maybe wait and see before adding.

I like this analogy! Very creative!! hahaha!!

me also vested in first reit..just collecting dividends quarter after quarter.

[stilicon]

seen on CIMB TRADER (26/04/2010):

"First REIT Ltd (FIRT SP; S$0.87) – BUY – 1Q10 results came in line with expectation.
DPU of 1.9cts announced for the quarter forms 26% our full year forecast. Maintain BUY,
target price of S$1.08 (discount 8.6%) remain intact. First REIT is trading at 0.95x P/BV
and offers a forward dividend yield of 8.5%, significantly higher than its closest peer PLife
REIT, which is trading at 0.96x P/BV and a lower forward yield of 6.8%."

Imo, this Reit remains interesting. I have been accumulating between S$0,81 and S$0,86 in the past months.

[stilicon]

I wonder what people here think of the REITs quoted in Singapore today.
I think most are reaching very interesting valuation.
I personally look at Starhill Global and First Reit, and Suntec. This of course is (inter alias) a bet that interests will remain low for a long time.
Below is small table to look at most Sing. reits (in jpeg

SING & HK REITS.jpg

) :

[Blackjack]

Hi stilicon, any particular reason these 3?

[stilicon]

Hi Blackjack and Yes !
i) First Reit : a P/B ratio at about 0,82, and a nice stable sustainable (pay-out ratios vs eps or cash flows from op. activ. both below 90%) div of about 8,5%- 9% (say dpu = 7c net in the next 12 months), with hopefully very stable business and clients (healthcare). With that I put a TP of S$0,99 (DDM with a 6,8c next div (net), with a return requirement of 8%, a 0% increase in the next 5 years, and a -1,5% increase for the LT (not very aggressive set). So at 0,80 S$ or even 0,82 S$, I will be a buyer tomorrow.

ii) Starhill Global : retail business in SE Asia should not be immediately impacted by all the bankrupt european states debts stories + I liked the last malaysian acquisition + I put a TP of 0,62S$ on it (again DDM-style, 3,4c net next div, 8% return requ. , 0% growth in the next 5 years, 1% LT growth - again not too demanding hypo. imo)

iii) Suntec : more for trading over a few months. To have some sing. office exposure. And the fondamentals are very correct again (P/B below 0,7, nice div etc., plus sing. offices are not expensive compare to other possible business centers)

[ichew]

Hi Blackjack and Yes !
i) First Reit : a P/B ratio at about 0,82, and a nice stable sustainable (pay-out ratios vs eps or cash flows from op. activ. both below 90%) div of about 8,5%- 9% (say dpu = 7c net in the next 12 months), with hopefully very stable business and clients (healthcare). With that I put a TP of S$0,99 (DDM with a 6,8c next div (net), with a return requirement of 8%, a 0% increase in the next 5 years, and a -1,5% increase for the LT (not very aggressive set). So at 0,80 S$ or even 0,82 S$, I will be a buyer tomorrow.

hi stilicon
i have not studied First REIT. Still, i like to give my 2-cents b4 u buy

1) P/B = 0.82
do note that book value r determined by the company
sure they can get an indept coy to value the assets but we have learned from recent crisis how indept these valuers r
i am not implying tat First REIT will do such a thing but it is naive to think tat a coy will not engage a valuer who will help make their book values look better
and to get repeat biz, it is very tempting for the valuer to co-operate

2) as most assets r not in sg, one must add in a little more margin of safety
eg i can walk into their new adam rd hospital n check it out but it is harder for the ones situated in indo
r the toilets there maintained? etc etc
mebbe talking to some indo frens/ maids will help? ie wat do they tink of these hospitals? will they go?

3) political risk
sometimes living in sg makes us think everywhere is stable politically like sg
but recent bkk incident tells us o'wise
how's indo politics now like? will currency exch rates impact the earnings etc?

of cos, if short-term punts, then no need to tink so much much
just take out a chart

[stilicon]

Hello ichew,
I like all of your three points. You are definitely right. There are some risks indeed. Is the div. premium fairly compensating for all those risks ? Nobody knows for sure.

[Blackjack]

Out of the 3, I am holding on to the first 2. But I do agree with ichew's reasoning as well. In fact I think with the recent fall in prices throughout I think there may be more relative value to be found in other counters (Not necessarily implying I'm suggesting a switch out to other counters but I'm trying to be as unbiased as possible)