SINGAPORE (Jan 18): CIMB is reiterating its “hold” call on First REIT with a higher target price of $1.44 from $1.39 previously after its manager declared a FY17 distribution per unit (DPU) of 8.47 cents, in line with the research house’s expectations and making up 100.3% of its full-year forecast.
In a Thursday report, lead analyst Lock Mun Yee says the REIT’s latest results were mainly boosted by its new acquisitions including of Siloam Hospital Labuan Bajo and Lippo Plaza Buton, which led to the revaluation of the overall portfolio and thus resulting in a slightly higher net asset value (NAV) of $1.0147 per unit.
Looking ahead, Lock expects First REIT’s earnings to continue growing on the back of a full year’s contributions from its 2017 acquisitions, and says these properties should add an estimated $5.3 million to annual revenue or about 5% to the topline of the trust.
She also highlights the potential for more new acquisitions given the trust’s strong balance sheet that points to low gearing and up to $400 million in syndicated secured financing facilities.
“We tweak our FY18-19 DPU estimates post the results and introduce our FY20 projections. Consequently, our DDM-based target price is raised to $1.44, after rolling forward our assumptions. First REIT is currently trading at 6.4% FY18F DPU yield and 1.38 times P/BV,” notes the analyst.
Meanwhile, OCBC continues to rate First REIT at “buy” while also lifting its fair value estimate on the trust to $1.48 from $1.44 previously after rolling forward its valuations and incorporating contributions from Siloam Hospitals Yogyakarta.
In a Friday note, OCBC analyst Joseph Ng says he expects First REIT to continue exploring yield-accretive assets for addition to its portfolio moving forward.
The analyst believes the REIT should be able to make two to three acquisitions this year as a base case, while a faster-than-expected rate of acquisitions could surprise on the upside and remains a “live possibility” at this juncture.
“In terms of valuations, we continue to observe value on a relative basis in comparison to Parkway Life REIT,” he adds.
As at 11.26am, units in First REIT are trading flat at $1.41.
