Brokers' call: First Reit


Broker: CIMB

Call: Buy

Target Price: $1.48

Lifted by new contributions and better operational performance, First Reit reported a 6.2 per cent rise year-on-year in third-quarter distributable income to $15.6 million.

The topline growth of 6.1 per cent was driven by contributions from Siloam Sriwijaya, acquired in December last year, as well as the better performance of the Indonesia and Singapore properties.

Property expenses dipped due to lower expenses from Sarang Hospital in South Korea. Thus, net profits interest rose at a higher rate of 6.8 per cent to $25 million. However, higher interest expense on the back of additional loans taken to fund the purchase of Siloam Sriwijaya and greater other expenses partly offset the gain.

Looking forward, First Reit's inorganic growth prospects remain strong and visible. There are strong acquisition opportunities from its sponsor, Lippo Karawachi, which has a strong pipeline of more than 40 hospitals.

First Reit offers dividend yields of 6.5 per cent and 6.6 per cent for next year and 2017 with a stable earnings profile.


Broker: OCBC Investment Research

Call: Buy

Target Price: 93 cents

Soilbuild Business Space Reit reported an in-line set of third-quarter results with gross revenue growing 22.4 per cent to $20.7 million, and distribution per unit growing 5.1 per cent to 1.625 cents.

This year-on-year growth was driven by contributions from three properties acquired between October last year and May this year.

Net profits interest jumped 25.3 per cent year on year to $17.8 million.

Soilbuild Reit's occupancy rate came down slightly from 99.8 per cent to 98.7 per cent, but this had already been flagged by management as a potential issue at the start of the year.

In terms of capital management, Soilbuild Reit has fixed 97.9 per cent of its interest-bearing borrowings for just over two years.

Despite the soft outlook in Singapore economic estimates, Soilbuild Reit has managed to stay resilient, which can be attributed to the management's proactive approach and asset quality.

A version of this article appeared in the print edition of The Straits Times on October 19, 2015, with the headline 'Brokers'Call'. Print Edition | Subscribe