SINGAPORE (Oct 3): OCBC Investment Research is maintaining its “hold” call on healthcare-focused First REIT with a fair value estimate of $1.38, following the release of Singapore’s latest inflation figures.
To recap, inflation in Singapore was up 0.4% in Aug 2017, moderating from July’s 0.6% growth such that the median Bloomberg consensus for 2017’s consumer price index (CPI) has been revised downwards to 0.8% from 0.9%.
See: Singapore records 0.4% inflation in August
In a Tuesday report, lead analyst Joseph Ng says the slight dip in inflation should not significantly affect base rental revisions, and that positive accretive acquisitions this year should help to provide support to the REIT’s distribution per unit (DPU).
Based on the research house’s projections at the price of $1.335 per unit, First REIT is currently trading at a FY17 distribution yield of 6.4% and a price-to-book (P/B) ratio of 1.3 times.
Following a recent visit to four of First REIT’s hospitals in Jakarta, Ng notes that each hospital has its own Centre of Excellence to represent its areas of specialisation.
The hospitals are namely Siloam Hospitals Lippo Village (SHLV), Siloam Hospitals Kebon Jeruk (SHKJ), Mochtar Riady Comprehensive Cancer Centre (MRCCC), and Siloam Hospitals TB Simatupang (SHTB).
“We also understand that both SHLV and SHKJ have obtained the coveted JCI-accreditation, which bears testament to their level of medical excellence,” he adds.
Ng adds that the four First-REIT assets had arrangements or facilities in place to cater to patients under the Healthcare and Social Security Agency (BPJS) scheme, with Class III wards catered for them in “very good condition”.
“While we believe that the margins from patients seeking treatment under the BPJS scheme might not be as high as those under private insurance or self-payment, we still think that the programme will nonetheless help operators like Siloam increase utilisation of their wards and facilities,” says the analyst.
“Greater growth by Siloam would increase the pipeline of ROFR assets for FREIT, thereby granting the REIT opportunities to grow its DPU inorganically,” he adds.
As at 3:02pm, units in First REIT are trading 1 cent higher at $1.35, 1.27 times P/NAV.
