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REIT│Singapore
March 13, 2015
COMPANY NOTE
First REIT
FIRT SP / FRET.SI
Market Cap
Avg Daily Turnover
Free Float
US$726.2m
US$0.76m
66.2%
S$1,000m
S$1.02m
727.3 m shares
Current
S$1.35
Target
S$1.48
Prev. Target
N/A
Up/Downside
9.6%
Conviction|
All the right mix
Notes from the Field
————————————————————————————————————————
TAN Xuan, CFA
T (65) 6210 8698
E [email protected]
PANG Ti Wee
T (65) 6210 8609
E [email protected]
LOCK Mun Yee
T (65) 6210 8606
E [email protected]
Company Visit
Channel Check
Expert Opinion
Customer Views
————————————————————————————————————————
Show Style "View Doc Map"
Indonesia healthcare expenditure is predicted to grow at CAGR of
14.9% between 2012-2018, and FIRT offers direct exposure to the
growth of its healthcare infrastructure. FIRT’s key differentiating
factor lies in its strong acquisition pipeline and inorganic growth,
consisting of 9 completed assets and another 30 under development.
We initiate coverage on FIRT with an
Add rating and DDM-based target
price of S$1.48 (discount rate 7.8%).
FIRT’s FY15-16 dividend yield and
P/BV of 6.5-6.6%/1.3x are higer than
Parkway Life REIT’s 5.4-5.9%/1.4x
and global healthcare REITs average
of 5.5%/1.8x. Catalysts could come
from
potential
yield-accretive
acquisitions, plans to unlock value of
untapped GFA and greater visibility
on or completion of pipeline assets.
Right market at right time
Contents
1. BACKGROUND .............................................................. 5
2. RIGHT MARKET AT RIGHT TIME ................................. 7
3. RIGHT STRUCTURE ...................................................... 9
4. A STRONG PIPELINE .................................................. 12
5. VALUATION AND RECOMMENDATION ..................... 16
6. RISKS ........................................................................... 19
7. SWOT ANALYSIS ........................................................ 20
8. APPENDICES ............................................................... 21
Price Close
1.300
112.8
1.200
106.5
1.100
100.3
1.000
25
20
15
10
5
94.0
Vol m
119.0
Jun-14
Sep-14
Dec-14
Source: Bloomberg
52-week share price range
1.35
1.36
1.06
1.48
Current
Target
Indonesia healthcare needs are
underserved and the government has
ambitious healthcare plan that target
to provide insurance coverage for all
~250m Indonesians by 2019 (up from
the current 132m). As a result,
Indonesia healthcare expenditure is
predicted to grow at CAGR of 14.9%
over 2012-2018, driven by a
combination of rising affluence,
changing lifestyles, urbanisation and
pent-up demand. A key challenge that
needs to be addressed is the lack of
healthcare
infrastructure,
with
Indonesia’s
hospital-bed-topopulation and doctor-to-population
ratios are only one-third
and
one-tenth that of global average.
Right structure
FIRT offers direct exposure to the
growth of healthcare infrastructure in
Indonesia, without foreign exchange
and operating risks. Operating risks
are limited, as Indonesian hospitals
(95% of total assets) are master leased
for 15+15 years, with the leases
consisting of mainly base rental
(annual escalation of 0-2%). Foreign
exchange risk is mitigated by
S$-denominated rental revenue from
its Indonesian and Singapore assets.
A strong pipeline
Lippo Karawaci (LK), FIRT’s sponsor,
and its subsidiary Siloam Hospitals
plan to double bed capacity by 2017.
As a result, FIRT has nine completed
hospitals as potential acquisition
targets and another 30 in the pipeline
under development. We expect
S$150m of acquisitions at 10% gross
yield to increase DPU and target price
by 4-6%, and lift gearing to 34.7%
(with 50% debt funding). Thereafter,
every S$50m acquisition will result in
~1% upside to our DPU assuming 25%
debt funding. There is also hidden
value within the portfolio in the form
of untapped GFA. These have not
been factored into our model.
Financial Summary
Relative to FSSTI (RHS)
1.400
Mar-14
|
Gross Property Revenue (S$m)
Net Property Income (S$m)
Net Profit (S$m)
Distributable Profit (S$m)
Core EPS (S$)
Core EPS Growth
FD Core P/E (x)
DPS (S$)
Dividend Yield
Asset Leverage
BVPS (S$)
P/BV (x)
Recurring ROE
% Change In DPS Estimates
CIMB/consensus DPS (x)
Dec-13A
83.3
80.2
117.8
52.09
0.083
33.1%
16.16
0.075
5.57%
31.9%
0.97
1.40
9.29%
Dec-14A
93.3
91.9
90.6
58.22
0.073
(11.4%)
18.43
0.081
5.96%
32.7%
1.02
1.33
7.38%
Dec-15F
101.5
100.0
59.0
65.80
0.080
9.8%
16.79
0.087
6.48%
32.9%
1.00
1.35
7.95%
Dec-16F
103.4
101.9
60.5
67.29
0.082
1.8%
16.50
0.089
6.58%
33.0%
0.99
1.37
8.21%
Dec-17F
105.4
103.9
62.0
68.81
0.083
1.8%
16.22
0.090
6.68%
33.1%
0.97
1.39
8.48%
1.04
1.02
1.01
SOURCE: CIMB, COMPANY REPORTS
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
Designed by Eight, Powered by EFA
First REIT│Singapore
March 13, 2015
PEER COMPARISON
Research Coverage
Bloomberg Code
FIRT SP
PREIT SP
RHT SP
First REIT
Parkway Life REIT
Religare Health Trust
Market
SG
SG
SG
Recommendation
ADD
ADD
HOLD
Rolling P/BV (x)
Price
1.35
2.34
1.06
Target Price
1.48
2.60
1.06
Upside
9.6%
11.3%
0.2%
Rolling Dividend Yield
1.800
12.0%
1.600
10.0%
1.400
1.200
8.0%
1.000
6.0%
0.800
0.600
4.0%
0.400
2.0%
0.200
0.000
Jan-11
Jan-12
Jan-13
First REIT
Jan-14
0.0%
Jan-11
Jan-15
Parkway Life REIT
Religare Health Trust
Peer Aggregate: P/BV vs Asset Leverage
1.40
35.0%
1.20
30.0%
1.00
25.0%
0.80
20.0%
0.60
15.0%
0.40
10.0%
0.20
5.0%
Jan-14
Rolling P/BV (x) (lhs)
Jan-14
Parkway Life REIT
Jan-15
Religare Health Trust
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Jan-13
Jan-13
Peer Aggregate: Dividend Yield
40.0%
Jan-12
Jan-12
First REIT
1.60
0.00
Jan-11
Mkt Cap US$m
726
1,028
609
Jan-15
0.0%
Jan-11
Jan-16
Jan-12
Asset Leverage (rhs)
Jan-13
Jan-14
Jan-15
Rolling Dividend Yield
Valuation
First REIT
Parkway Life REIT
Religare Health Trust
Dividend Yield
Dec-14
Dec-15
5.96%
6.48%
4.92%
5.86%
7.33%
7.50%
Dec-16
6.58%
5.38%
8.25%
Dec-14
1.33
1.37
1.20
P/BV (x)
Dec-15
1.35
1.38
1.23
DPS Growth
Dec-14
Dec-15
7.0%
8.7%
7.1%
19.0%
9.9%
2.3%
Dec-16
1.5%
-8.1%
9.9%
Asset Leverage
Dec-14
Dec-15
32.7%
32.9%
35.0%
36.0%
10.7%
13.3%
P/E (FD) (x)
Dec-15
16.79
18.59
17.01
Dec-16
1.37
1.37
1.25
Dec-14
10.72
13.18
18.80
Dec-16
16.50
18.28
14.21
Dec-16
33.0%
36.0%
13.8%
Fully Diluted EPS Growth
Dec-14
Dec-15
Dec-16
-26.7%
-36.2%
1.8%
9.3%
-29.1%
1.7%
48.0%
10.5%
19.7%
Growth and Returns
First REIT
Parkway Life REIT
Religare Health Trust
SOURCE: CIMB, COMPANY REPORTS
Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends.
NPAT/EPS values for calculations and valuations are based on recurring and normalised values for GAAP and IFRS accounting standard companies respectively.
2
First REIT│Singapore
March 13, 2015
BY THE NUMBERS
Share price info
Share px perf. (%)
1M
3M
12M
Relative
2.0
4.0
16.1
Absolute
0.7
5.5
Major shareholders
25.0
% held
LIPPO KARAWACI TBK PT
27.7
PT MENARA TIRTA INDAH
6.0
P/BV vs Asset Leverage
Dividend Yield vs Net DPS - (S$)
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Rolling P/BV (x) (lhs)
35.0%
31.1%
27.2%
23.3%
19.4%
15.6%
11.7%
7.8%
3.9%
0.0%
0.1000
0.0900
0.0800
0.0700
0.0600
0.0500
0.0400
0.0300
0.0200
0.0100
0.0000
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Asset Leverage (rhs)
DPS (lhs)
7.0%
6.3%
5.6%
4.9%
4.2%
3.5%
2.8%
2.1%
1.4%
0.7%
0.0%
Dividend Yield (rhs)
Profit & Loss
Rental revenue in 2015 to grow from
S$70m of acquisitions in 2014.
Organically, growth should remain
stable at ~2% p.a.
(S$m)
Rental Revenues
Other Revenues
Gross Property Revenue
Total Property Expenses
Net Property Income
General And Admin. Expenses
Management Fees
Trustee's Fees
Other Operating Expenses
EBITDA
Depreciation And Amortisation
EBIT
Net Interest Income
Associates' Profit
Other Income/(Expenses)
Exceptional Items
Pre-tax Profit
Taxation
Minority Interests
Preferred Dividends
Net Profit
Distributable Profit
Dec-13A
83.3
0.0
83.3
(3.1)
80.2
0.0
(8.0)
(0.3)
(1.7)
70.2
0.0
70.2
(12.2)
Dec-14A
93.3
0.0
93.3
(1.4)
91.9
0.0
(9.1)
(0.3)
(1.9)
80.5
0.0
80.5
(15.0)
Dec-15F
101.5
0.0
101.5
(1.5)
100.0
0.0
(9.1)
(0.3)
(2.0)
88.4
0.0
88.4
(15.0)
Dec-16F
103.4
0.0
103.4
(1.5)
101.9
0.0
(9.1)
(0.3)
(2.1)
90.3
0.0
90.3
(15.1)
Dec-17F
105.4
0.0
105.4
(1.6)
103.9
0.0
(9.1)
(0.3)
(2.1)
92.3
0.0
92.3
(15.1)
0.0
61.3
119.4
(1.5)
0.0
47.2
112.7
(22.1)
0.0
0.0
73.4
(14.4)
0.0
0.0
75.3
(14.8)
0.0
0.0
77.2
(15.1)
117.8
52.1
90.6
58.2
59.0
65.8
60.5
67.3
62.0
68.8
Cash Flow
Acquisition size of an average
~S$100m for the past three years. We
expect FIRT to continue growing
through acquisitions given its strong
asset pipeline. This is a key catalyst
and has yet to be factored into our
model.
(S$m)
Pre-tax Profit
Depreciation And Non-cash Adj.
Change In Working Capital
Tax Paid
Others
Cashflow From Operations
Capex
Net Investments And Sale Of FA
Other Investing Cashflow
Cash Flow From Investing
Debt Raised/(repaid)
Equity Raised/(Repaid)
Dividends Paid
Cash Interest And Others
Cash Flow From Financing
Total Cash Generated
Free Cashflow To Firm
Free Cashflow To Equity
Dec-13A
119.4
12.2
(0.3)
(13.1)
(54.8)
63.3
Dec-14A
112.7
15.0
8.9
(16.2)
(39.7)
80.8
Dec-15F
73.4
15.0
(0.6)
(14.4)
0.0
73.5
Dec-16F
75.3
15.1
(0.1)
(14.8)
0.0
75.4
Dec-17F
77.2
15.1
(0.1)
(15.1)
0.0
77.0
(142.0)
0.2
(141.8)
140.6
0.0
(42.8)
(10.5)
87.3
8.8
(78.3)
49.9
(67.7)
0.2
(67.5)
39.3
0.0
(39.8)
(13.8)
(14.4)
(1.1)
13.5
37.5
0.0
0.2
0.2
0.0
0.0
(64.5)
(15.2)
(79.7)
(6.0)
73.9
58.7
0.0
0.2
0.2
0.0
0.0
(65.9)
(15.2)
(81.2)
(5.6)
75.8
60.5
0.0
0.1
0.1
0.0
0.0
(67.4)
(15.2)
(82.6)
(5.5)
77.2
62.0
SOURCE: CIMB RESEARCH, COMPANY
3
First REIT│Singapore
March 13, 2015
BY THE NUMBERS
Balance Sheet
Investment properties to remain
stable, with limited impact from foreign
exchange movements. We have yet to
factor any revaluation gain into our
model.
(S$m)
Total Investments
Intangible Assets
Other Long-term Assets
Total Non-current Assets
Total Cash And Equivalents
Inventories
Trade Debtors
Other Current Assets
Total Current Assets
Trade Creditors
Short-term Debt
Other Current Liabilities
Total Current Liabilities
Long-term Borrowings
Other Long-term Liabilities
Total Non-current Liabilities
Shareholders' Equity
Minority Interests
Preferred Shareholders Funds
Total Equity
Dec-13A
1,052
0
0
1,053
29
Dec-14A
1,172
0
1
1,173
28
Dec-15F
1,172
0
1
1,173
22
Dec-16F
1,172
0
1
1,173
17
Dec-17F
1,172
0
1
1,173
11
25
2
56
30
0
20
50
354
22
376
683
9
3
40
20
26
21
68
370
29
399
745
10
3
35
21
26
21
68
370
29
399
740
10
3
29
21
26
21
69
370
29
399
734
10
3
24
21
26
21
69
370
29
399
729
683
745
740
734
729
Dec-13A
44.5%
40.1%
96.3%
3.58%
5.68
1.3%
44%
1.12
1.12
0.59
12.2%
Dec-14A
12.0%
14.5%
98.5%
7.05%
5.29
19.6%
64%
0.58
0.58
0.41
7.8%
Dec-15F
8.8%
8.8%
98.5%
8.66%
5.81
19.6%
109%
0.50
0.50
0.32
4.9%
Dec-16F
1.9%
1.9%
98.5%
1.50%
5.94
19.6%
109%
0.43
0.43
0.24
5.0%
Dec-17F
1.9%
1.9%
98.5%
1.51%
6.06
19.6%
109%
0.35
0.35
0.16
5.2%
Dec-13A
N/A
N/A
N/A
N/A
100.0%
1,052.3
N/A
Dec-14A
N/A
N/A
N/A
N/A
100.0%
1,172.0
N/A
Dec-15F
N/A
N/A
N/A
N/A
100.0%
1,172.0
N/A
Dec-16F
N/A
N/A
N/A
N/A
100.0%
1,172.0
N/A
Dec-17F
N/A
N/A
N/A
N/A
100.0%
1,172.0
N/A
Key Ratios
Growth from acquisitions.
Gross Property Revenue Growth
NPI Growth
Net Property Income Margin
DPS Growth
Gross Interest Cover
Effective Tax Rate
Net Dividend Payout Ratio
Current Ratio
Quick Ratio
Cash Ratio
Return On Average Assets
Key Drivers
High occupancy from master leases.
Rental Rate Psf Pm (S$)
Acq. (less development) (US$m)
RevPAR (S$)
Net Lettable Area (NLA) ('000 Sf)
Occupancy (%)
Assets Under Management (m) (S$)
Funds Under Management (m) (S$)
SOURCE: CIMB RESEARCH, COMPANY
4
First REIT│Singapore
March 13, 2015
All the right mix
1. BACKGROUND
Listed since Dec 2006, First Real Estate Investment Trust (FIRT) is a
healthcare real estate investment trust (REIT) focusing on real estate assets in
Asia that are primarily used for healthcare and healthcare-related purposes.
FIRT’s S$1.17bn portfolio consists of 16 assets, of which 12 are located in
Indonesia, three in Singapore and one in South Korea. Indonesian hospitals
make up the bulk of its portfolio, at ~96% of the total value. PT Lippo Karawaci
Tbk (LK) is the sponsor of FIRT and Bowsprit Capital, an indirect subsidiary of
the sponsor, is the manager of FIRT.
Figure 1: Overview of initial portfolio
Usage
MRCCC
Siloam Hospitals Lippo
Village
Hospital
Hospital
Oncology Digestive Unit
Neuroscience, Cardiology
Siloam Hospitals Bali
Siloam Hospitals TB
Simatupang
Hospital
Trauma, Cardiology, Oncology,
Neuroscience
2,489
18,605
4,145
17,442
Hospital
Trauma, Orthopaedics,
Cardiology
9,025
37,933
27,284
20,958
Purchase Price (S$m)
170.5
94.3
97.3
93.1
Appraised Value (S$m)
253.2
162.1
121.6
116.5
Centre of Excellence
Land area (sq m)
GFA (sq m)
Max no. of Beds / Saleable rooms
375
260
295
271
Year of Building Completion
2010
1995
2012
2013
Lease Commencement Date
30-Dec-10
11-Dec-06
13-May-13
22-May-13
15 + 15
15 + 15
15 + 15
15 + 15
29-Dec-25
10-Dec-21
12-May-28
21-May-28
Lease Terms
Lease Expiry Date
SOURCES: CIMB, COMPANY REPORT
Figure 2: Overview of initial portfolio (cont’d)
Siloam Hospitals Manado &
Hotel Aryaduta Manado
Siloam Hospitals Kebon
Jeruk
Siloam Hospitals Makassar
Integrated Hospital & Hotel
Hospital
Hospital
Trauma
Urology centre, Orthopaedics
Trauma Cardiology
5,518
11,420
3,963
Hospital
Urology, Internal Medicine,
Trauma
9,900
36,051
18,316
14,307
11,125
Purchase Price (S$m)
83.6
50.6
59.3
35.0
Appraised Value (S$m)
104.2
91.9
72.3
46.0
224 beds / 200 rooms
201
416
126
Usage
Centre of Excellence
Land area (sq m)
GFA (sq m)
Max no. of Beds / Saleable rooms
Siloam Hospitals Lippo
Cikarang
Year of Building Completion
2011
1991
2012
2002
Lease Commencement Date
30-Nov-12
11-Dec-06
30-Nov-12
31-Dec-10
Lease Terms
Lease Expiry Date
15 + 15
15 + 15
15 + 15
15 + 15
29-Nov-27
10-Dec-21
29-Nov-27
30-Dec-25
SOURCES: CIMB, COMPANY REPORT
5
First REIT│Singapore
March 13, 2015
Figure 3: Overview of initial portfolio (cont’d)
Usage
Siloam Sriwijaya
Imperial Aryaduta Hotel &
Country Club
Hospital
Hotel & Country Club
Emergency, Trauma
--
Siloam Hospitals Purwakarta
Siloam Hospitals Surabaya
Hospital
Fertility services, Stroke centre
--
54,410
Hospital
Emergency, Trauma, Health
Ministry's BPJS Program
7,990
15,709
17,427
8,254
9,227
Purchase Price (S$m)
39.2
21.2
31.0
16.8
Appraised Value (S$m)
43.8
42.1
38.1
33.2
Centre of Excellence
Land area (sq m)
GFA (sq m)
6,862
Max no. of Beds / Saleable rooms
347
197
203
160
Year of Building Completion
2010
1994
2005 & 2008
1977
Lease Commencement Date
29-Dec-14
11-Dec-06
28-May-14
11-Dec-06
15 + 15
15 + 15
15 + 15
15 + 15
28-Dec-29
10-Dec-21
27-May-29
10-Dec-21
Lease Terms
Lease Expiry Date
SOURCES: CIMB, COMPANY REPORT
Figure 4: Overview of initial portfolio (cont’d)
The Lentor Residence
Pacific Healthcare Nursing
Home II @ Bukit Panjang
Pacific Healthcare Nursing
Home @ Bukit Panjang
Sarang Hospital
Nursing Home
Nursing Home
Nursing Home
Hospital
Land area (sq m)
2486
2,000
1,984
2,142
GFA (sq m)
4,005
3,563
3,593
4,982
13
11.5
11.8
US$13m
17.6
10.6
10.5
US$6.3m
208
265
259
217
2006
2004
2010
Usage
Centre of Excellence
Purchase Price (S$m)
Appraised Value (S$m)
Max no. of Beds / Saleable rooms
Year of Building Completion
Lease Commencement Date
1999 & 2013 (new extension
building)
8-Jun-07
Lease Terms
10 + 10
Lease Expiry Date
7-Jun-17
11-Apr-07
11-Apr-07
10 + 10 (tenant has exercise the 10 + 10 (tenant has exercise the
option)
option)
10-Apr-27
10-Apr-27
5-Aug-11
10 + 10
4-Aug-21
SOURCES: CIMB, COMPANY REPORT
6
First REIT│Singapore
March 13, 2015
2. RIGHT MARKET AT RIGHT TIME
Right market
Indonesia’s healthcare expenditure lags behind peers
Indonesia’s healthcare expenditure lags those of regional peers, both in terms
of per capita and as a percentage of GDP. Its healthcare expenditure per capita
of US$61 in 2012 was a fraction those of developed countries’, about half of
Malaysia’s and a quarter of Thailand’s. As a percentage of GDP, the healthcare
expenditure of Indonesia only formed 3% in 2012, the lowest among its
regional peers.
Figure 5: Total healthcare expenditure as % GDP (2012)
Figure 6: Healthcare expenditure per capita (2012)
US$
20.0%
18.0%
9,000
17.9%
8,000
16.0%
Please fill in the values above to have them entered in your report
7,000
14.0%
6,000
12.0%
10.0%
8.0%
6.0%
Title:
Source:
8,895
5,000
9.4%
7.3%
4,000
6.6%
5.4%
4.7%
3,647
3,000
4.4%
4.0%
4.0%
4.0%
2,426
2,000
3%
2.0%
1,000
0.0%
0
SOURCES: CIMB, GLOBAL HEALTH EXPENDITURE DATABASE
419
322
115
108
102
69
61
SOURCES: CIMB, GLOBAL HEALTH EXPENDITURE DATABASE
Healthcare expenditure to double from 2012 to 2018
According to Frost & Sullivan, Indonesia’s healthcare expenditure will expand
by CAGR of 14.9% in 2012-2018. This would be driven by rising affluence,
changing lifestyles, increasing urbanisation and pent-up demand.
Right time
Ambitious healthcare plans
The Indonesian government has an ambitious healthcare insurance plan called
the Jaminan Kesehatan Nasional (JKN). The plan, which was implemented on 1
Jan 2014, aims to unify various public insurance schemes under a single agency
(BPJS Kesehatan) and provide better health insurance coverage for all
Indonesians (~250m) by 2019. This is almost double of the current coverage of
~132m Indonesians.
Healthcare
infrastructure
implementation
is
the
main
impediment
to
Since its implementation, the JKN has met with criticism on issues such as
longer waiting times and poorer quality of care at participating hospitals. We
think that this was due to healthcare infrastructure being spread too thin, a key
issue that needs to be addressed in order to meet JKN’s 2019 target.
Indonesia lacks both healthcare infrastructure and personnel. Despite the
number of hospitals and hospital beds increasing by 12-15% p.a. in 2007- 2012,
Indonesia’s 0.97 bed-per-1,000 population ratio is still well below the global
average of 3.0 and the Organisation for Economic Co-operation and
Development (OECD) average of 4.0 beds per 1,000 people. In addition,
Indonesia has the one of the lowest number of doctors per 1,000 people in the
region despite the country’s rising affluence levels.
7
First REIT│Singapore
March 13, 2015
Figure 7: Hospital bed-to-population ratio
Figure 8: Doctor-to-population ratio
Doctors /
1,000
population
3.00
2.79
Beds / 1,000
population
3.50
3.00
2.95
2.84
Global avg = 3
2.84
Title:
Source:
Please fill in the values above to have them entered in your report
2.50
2.31
2.50
2.16
2.00
2.01
1.77
2.00
1.63
1.48
1.50
Global avg = 3
1.26
1.50
1.02
1.00
1.00
0.97
0.74
0.50
0.50
0.00
0.31
0.30
0.00
China
US
UK
Singapore Thailand Malaysia
India
Indonesia
UK
SOURCES: CIMB, COMPANY REPORTS, WHO, OECD, MINISTRIES OF HEALTH
US
Singapore
China
Malaysia
India
Indonesia Thailand
SOURCES: CIMB, COMPANY REPORTS, WHO, OECD, MINISTRIES OF HEALTH
In an interview with the Jakarta Post, Fachmi Idris (BPJS Kesehatan’s
president director) estimates that there will be enough doctors to serve all
Indonesians by 2019, given the 6,000-10,000 graduates annually. As such, the
government only needs to work on the supply of medical facilities, which is the
responsibility of both the Health Ministry and local governments. We believe
there is ample room for private healthcare providers to grow and fill the gap.
8
First REIT│Singapore
March 13, 2015
3. RIGHT STRUCTURE
FIRT is an optimal vehicle to ride on the growth of healthcare infrastructure in
Indonesia without exposure to foreign exchange and operating risks.
Strong sponsor and operator
PT Lippo Karawaci Tbk (LK), FIRT’s sponsor, is Indonesia’s largest listed
property company by assets (Rp35.7bn) and market cap (Rp25.5bn). LK
operates four business divisions – namely residential and urban development,
hospitals, commercial and asset management. It is also the fastest-growing
Indonesian real estate group, with its market cap expanding by more than 10x
since 2004.
Siloam, LK’s listed subsidiary, is the market leader within the
highly-fragmented private healthcare sector, with 7.4% market share in
Indonesia. Its nearest competitor, Mitra, has only 3% market share and around
one-third of its bed capacity.
We believe that, together, Siloam and LK are well positioned to ride on the
growth of the Indonesian healthcare sector.
Figure 9: Private hospital market share, 2012
Siloam, 7.4%
Mitra, 3.0%
Figure 10: Hospital bed capacity, 2012
Awal Bros,
2.5% Sari Asih,
2.2%
Title:
Source:
3500
3000
3000
Please fill in the values above to have them entered in your report
Hermina,
2.0%
2500
Ramsay, 1.6%
2000
Omni, 1.1%
Mayapada,
0.5%
1500
1200
1000
1000
900
820
650
480
500
450
440
400
200
129
0
Others, 79.8%
SOURCES: CIMB, FROST & SULLIVAN
SOURCES: CIMB, FROST & SULLIVAN
Limited operating risks
There is limited operating risks, as Indonesian hospitals (95% of FIRT’s assets
and FY14 revenue) are mostly master leased to LK for 15-year terms, with
options to renew for another 15 years. The majority of its FY14 revenue
consisted of base rental (97%), with annual escalation of a minimum 0% and
maximum 2% and pegged to two times the growth of Singapore CPI.
9
First REIT│Singapore
March 13, 2015
Figure 11: Lease structures
Geography Base Rental
Figure 12: Revenue breakdown by geography
Variable Rental
Singapore, 3%
FX
Indonesia
Fixed base rental
Annual escalation (2x %
increase of Singapore CPI, min
0% and capped at 2%)
0.75-2.0% of Indonesia
assets gross revenue
SGD
Singapore
Fixed base rental
Annual increment of 2%
NA
SGD
Korea
Fixed base rental
Annual increment of 2%
NA
USD
South Korea,
2%
Indonesia, 95%
SOURCES: CIMB, COMPANY REPORTS
SOURCES: CIMB, COMPANY REPORTS
Minimal foreign exchange risk
Foreign exchange risk is mitigated by the rents of the Indonesian and
Singaporean assets (98%) that are pegged to a fixed exchange rate throughout
the lease term.
One might argue that FIRT’s rental growth cap of 2% p.a. lags the double-digit
growth of Indonesia’s healthcare expenditure. However, Figure 13 shows that
FIRT’s base rental growth in Rupiah terms is comparable to that of Indonesia’s
healthcare expenditure during times of Rupiah depreciation. As such, we
believe that FIRT’s low rental growth cap is mitigated by the lower foreign
exchange risk.
Figure 13: Growth of FIRT’s base rent is comparable to that of Indonesia’s
healthcare expenditure during times of Rupiah depreciation
30%
25%
20%
15%
10%
5%
0%
2008
2009
2010
2011
2012
2013
2014
-5%
-10%
-15%
Appreciation / (depreciation) of Rp against S$
Growth in Indonesia healthcare expenditure in Rp terms
Growth in FIRT base rent in Rp terms (on a same hospital basis)
SOURCES: CIMB, COMPANY REPORTS
Limited interest rate and refinancing risks
Most of FIRT’s debt is denominated in S$ and spread out, with the earliest
refinancing expected in 2017. Additionally, FIRT has hedged 95% of its debt
against rising financing costs by funding 54% of its debt through fixed rate
loans/bonds and 46% via partially-hedged term loans. As such, any changes in
interest rates are likely to have limited impact on FY15-16 DPUs.
10
First REIT│Singapore
March 13, 2015
Figure 14: Debt maturity profile
Figure 15: Debt profile
S$m
Title:
Source:
200
180
38.7%
160
Please fill in the values above to have them entered in your rep
35.1%
140
120
26.2%
100
100
91.6
Term loan
(hedged), 46%
26.5
80
Fixed rate
loan/bond, 54%
60
40
78.5
20
49.2
55.5
2017
2018
0
2015
2016
2019
SOURCES: CIMB, COMPANY REPORTS
11
SOURCES: CIMB, COMPANY REPORTS
First REIT│Singapore
March 13, 2015
4. A STRONG PIPELINE
Nine completed potential assets for acquisition
LK has given FIRT the right of first refusal (ROFR) to all its healthcare
properties and currently operates 20 hospitals with a 4,758-bed capacity under
its subsidiary, Siloam Hospitals. FIRT owns 11 of those assets and has the
remaining nine completed hospitals as potential acquisition targets.
Figure 16: Potential acquisition targets
Location
Bed capacity
Centre of excellence
Status
SILOAM HOSPITALS JAMBI
SILOAM HOSPITALS BALIKPAPAN
SILOAM GENERAL HOSPITAL (RSUS)
East Sumatera
East Kalimantan
Tangerang (West of Jakarta)
100
228
640
Emergency & trauma
Emergency & trauma and Orthopedics
-
Mature
Mature
Opened in 2012
SOURCES: CIMB, COMPANY REPORT
Figure 17: Potential acquisition targets (cont'd)
Location
Bed capacity
Centre of excellence
Status
SILOAM HOSPITALS CINERE
BIMC KUTA
BIMC NUSA DUA
Depok (South of Jakarta)
Bali
Bali
40
18
20
Cardiology
Emergency & trauma
Emergency & Cosmetic Surgery
Opened in 2012
Opened in 2013
Opened in 2013
SOURCES: CIMB, COMPANY REPORT
12
First REIT│Singapore
March 13, 2015
Figure 18: Potential acquisition targets (cont'd)
Location
Bed capacity
Centre of excellence
Status
SILOAM HOSPITAL ASRI
SILOAM HOSPITALS MEDAN
SILOAM HOSPITALS KUPANG
South Jakarta
North Sumatera
East Nusa Tenggara
40
388
405
Urology
Opened in 2014
Opened in 4Q 2014
Opened in 4Q 2014
SOURCES: CIMB, COMPANY REPORT
Another 30 in the pipeline
We think the Indonesian private healthcare sector is in a sweet spot. On a
whole, we believe rising income, urbanisation and the JKN will propel growth
in the healthcare industry. However, we think the private sector will benefit
more as more Indonesians could turn to private hospitals for better service
given their frustration with the mandatory switch to JKN.
In view of the strong anticipated growth in healthcare expenditure and current
lack of infrastructure, Siloam has plans to expand its bed capacity to 10,000
beds and its network to 50 hospitals by 2017. It currently has 30 hospitals in
various stages of development and expects its hospitals to grow to up to
US$3.5bn in five years’ time. This gives FIRT an additional pipeline of 30
hospitals for acquisition upon asset completion.
Figure 19: Number of Siloam Hospitals
50
50
45
40
35
CAGR = 43%
30
25
20
20
16
15
12
10
5
7
4
0
2010
2011
2012
2013
2014F
2017F
SOURCES: CIMB, COMPANY REPORTS
13
First REIT│Singapore
March 13, 2015
Scenario analysis
We estimate S$150m in acquisitions will increase DPU and our target price by
4-6% and result in gearing of 34.7%, assuming 50% debt funding. To maintain
a gearing of below 35%, we believe further acquisition will require a higher
proportion of equity funding by above the S$150m mark, assuming the
properties are not revalued. Assuming 25% debt funding, every S$50m of
acquisition will result in ~1% increase in FY16 DPU.
Figure 20: Scenario analysis on acquisition
Impact to FY16 DPU
Acquisition Size
debt : equity
funding ratio
75:25
50:50
25:75
S$50m
S$100m
S$150m
S$200m
2.7%
2.0%
1.3%
5.2%
3.8%
2.5%
7.8%
5.6%
3.6%
10.2%
7.3%
4.6%
Impact to target price
Acquisition Size
debt : equity
funding ratio
75:25
50:50
25:75
S$50m
S$100m
S$150m
S$200m
2.1%
1.4%
0.8%
4.2%
2.8%
1.5%
6.2%
4.1%
2.1%
8.2%
5.4%
2.8%
Gearing
Acquisition Size
debt : equity
funding ratio
75:25
50:50
25:75
S$50m
S$100m
S$150m
S$200m
34.5%
33.5%
32.5%
36.0%
34.1%
32.2%
37.4%
34.7%
32.0%
38.7%
35.2%
31.7%
SOURCES: CIMB, COMPANY REPORTS
Our scenario analysis assumptions are:

We assume a gross yield of 10% and net property income (NPI) margin of
98%. Historical acquisitions of Siloam-operated hospitals in 2010 and
2012-2014 were transacted at gross yields of 9.9-10.8%, although
third-party acquisitions in Singapore (2007) and Korea (2011) were
transacted at lower yields.

We assume that the acquisition will make 50% rental contribution in FY15
and 100% from FY16 onwards.

We do not factor any revaluation gains into our calculation of net gearing.

We assume that equity is raised at the price of S$1.35/share.
Figure 21: Historical acquisitions
S$m
250
12.0%
10.8%
9.9%
9.9%
10.5%
10.0%
200
206
7.8%
190
8.0%
150
4.9%
143
6.0%
100
4.0%
70
50
2.0%
51
16
0
0.0%
2007
2010
2011
Acquisition size (LHS)
2012
2013
2014
Yield (RHS)
SOURCES: CIMB, COMPANY REPORTS
14
First REIT│Singapore
March 13, 2015
Hidden value
There is hidden value in several properties within the portfolio, namely Siloam
Hospitals Surabaya, Siloam Hospitals Kebon Jeruk and Imperial Aryaduta
Hotel & Country Club. As shown in Figures 22-24, the existing properties,
especially Imperial Aryaduta Hotel & Country Club, make up only a fraction of
the land area and redevelopment could more than double the GFA of the
properties.
We understand that LK owns adjacent land surrounding Siloam Hospitals
Surabaya and Siloam Hospitals Kebon Jeruk and plans to build an integrated
development. We believe that FIRT could realise the land’s value without
disrupting rental income by: 1) allowing LK to building a hospital adjacent to
the existing asset, 2) doing an asset swap with LK upon completion, and 3)
FIRT to top-up the excess value of the new property over the existing property.
Assuming a value of S$425psf GFA (the average book value of FIRT’s existing
Indonesian assets), the doubling of GFA at Siloam Hospitals Surabaya and
Siloam Hospitals Kebon Jeruk would be identical to acquisitions of S$41m and
S$83m, from FIRT’s perspective. Using assumptions similar to our sensitivity
analysis on acquisitions, this could result in total 3-4% accretion to our FY15
DPU and target price, assuming 50% funding via debt.
Figure 22: Siloam Hospitals Surabaya
Figure 23: Siloam Hospitals Kebon Jeruk (West Jakarta)
SOURCES: CIMB, COMPANY REPORTS
SOURCES: CIMB, COMPANY REPORTS
Figure 24: Imperial Aryaduta Hotel & Country Club
SOURCES: CIMB, COMPANY REPORTS
15
First REIT│Singapore
March 13, 2015
5. VALUATION AND RECOMMENDATION
Initiate with Add and target price of S$1.48
We initiate coverage on FIRT with an Add rating and target price of S$1.45.
This implies 1.48x FY15 P/BV, NPI yield of 6.6% and distribution yield of 5.9%.

We use the dividend discount model (DDM) to value FIRT, the same
valuation method that we used for all the REITs under our coverage.

We assume cost of equity of 7.8%, derived using a risk-free rate of 3.0%,
equity risk premium of 6.0% and beta of 0.8x.

Our long-term growth rate is 2%, consistent with the growth cap placed on
its Indonesian assets’ fixed rentals.
Figure 25: Target price based on DDM sensitivity analysis and implied P/BV and FY15 NPI yields
7.4%
7.6%
1.49
1.54
1.59
1.65
1.71
1.44
1.48
1.53
1.59
1.65
Implied P/BV (x)
1.48
1.53
1.58
1.64
1.71
1.43
1.48
1.53
1.58
1.64
Implied FY14 NPI Yield
6.6%
6.4%
6.2%
6.1%
5.9%
6.7%
6.6%
6.4%
6.3%
6.1%
Implied FY14 distribution yield
5.9%
5.7%
5.5%
5.3%
5.1%
6.1%
5.9%
5.7%
5.5%
5.3%
Terminal Growth
1.50%
1.75%
2.00%
2.25%
2.50%
Discount Rate
7.8%
Target price (S$)
1.39
1.43
1.48
1.53
1.59
Implied P/BV range (x)
1.39
1.43
1.48
1.53
1.58
Implied FY15 NPI yield range (%)
6.9%
6.7%
6.6%
6.4%
6.3%
Implied FY15 distribution yield (%)
6.3%
6.1%
5.9%
5.7%
5.5%
8.0%
8.2%
1.35
1.39
1.43
1.48
1.53
1.31
1.35
1.38
1.43
1.48
1.34
1.38
1.43
1.47
1.52
1.30
1.34
1.38
1.42
1.47
7.0%
6.9%
6.7%
6.6%
6.4%
7.2%
7.0%
6.9%
6.7%
6.6%
6.5%
6.3%
6.1%
5.9%
5.7%
6.7%
6.5%
6.3%
6.1%
5.9%
SOURCES: CIMB, BLOOMBERG, COMPANY REPORTS
Peer comparison
There are currently three healthcare REITs/trusts listed in Singapore and FIRT
is second in terms of asset size and market capitalisation.
Figure 26: Overview of Healthcare S-REITs/BTs
Asset base (S$m )
Market cap (S$m )
Sponsor
No. of assets
Bed capacity
GFA (m sf)
Capital m anagem ent
Reported leverage
Debt headroom (at 45% asset
leverage) (S$m )
Debt m aturity profile (S$m )
2015 expiry
2016 expiry
2017 expiry
2018 expiry
2019 expiry & beyond
All-in financing cost
Percentage of debt fixed
First REIT
1,172
996
Religare Health Trust
857
842
Parkw ay Life REIT
1,537
1,422
PT Lippo Karaw aci Tdk
Fortis Healthcare Limited
Parkw ay Holdings Limited
16
4,024
2.7
14
3,594
3.6
41
721
2.7
33%
15%
35%
262
478
299
65
19
80
80
103
305
1.4%
~80%
141
156
105
~4.5%
54%
63
~4.5%
0%
SOURCES: CIMB, COMPANY REPORTS
16
First REIT│Singapore
March 13, 2015
Geography and asset class exposure: FIRT offers exposure to Indonesia,
Religare Health Trust (RHT) to India and Parkway Life REIT (PREIT) to
Singapore/Japan. Most of the healthcare assets are hospitals.
Stability and growth: We believe PREIT and FIRT are similar and are more
stable than their peers, as most of their revenues come from fixed rentals
denominated in S$ or hedged in the long term. However, they have limited
organic growth, as the REITs are more reliant on inorganic growth. RHT is
probably more volatile, as it is subject to Rs:S$ fluctuations, but it offers higher
organic growth given its greater proportion of variable fees.
Figure 27: Geography split by asset value
Figure 28: Assets split by asset value
Figure 29: Estimated revenue split
100%
100%
90%
90%
100.0%
Title:
Source:
90.0%
80%
80%
70%
70%
70.0%
60%
60%
60.0%
50%
50%
50.0%
40%
40%
40.0%
30%
30%
30.0%
20%
20%
20.0%
10%
10%
10.0%
80.0%
Please fill in the values above to have them entered in your
Please
re
0.0%
0%
0%
FIRT
Singapore
RHT
Indonesia
Japan
PREIT
India
Others
SOURCES: CIMB, COMPANY REPORTS
Title:
Source
FIRT
RHT
Hospitals
PREIT
PREIT
FIRT
Fixed
Nursing homes
SOURCES: CIMB, COMPANY REPORTS
RHT
Variable
SOURCES: CIMB, COMPANY REPORTS
Fee structure: The three healthcare peers have fairly similar fee structures,
with a base fee of 0.3-0.4% p.a. of asset value and performance fee of 4.5-5.0%
of NPI or distributable income. FIRT and PREIT have acquisition and
divestment fees while RHT does not.
Figure 30: Fee comparison
First REIT
Religare Health Trust
Parkway Life REIT
Structure
REIT
Business Trust
REIT
Base Fee
0.4% p.a. of the asset value
0.4% p.a. of the asset value
0.3% p.a. of the asset value
4.5% p.a. of Distributable Income
4.5% p.a. of NPI
Performance Fee 5% p.a. of NPI
Acquisition Fee
1% of the acquisition price
-
1% of the acquisition price
Divestment Fee
0.5% of the sale price
-
0.5% of the sale price
SOURCES: CIMB, COMPANY REPORTS
Valuation: FIRT’s FY15 dividend yield of (6.5%) and P/BV (1.3x) is more
favourable than those of its direct peer PREIT (5.9% and 1.4x). While
healthcare REITs generally trade at higher P/BV multiples than S-REITs,
FIRT’s FY15 dividend yield is on par with the S-REIT average of 6.7%.
Additionally, FIRT’s FY15 dividend yield and P/BV appear attractive compared
to the average of 5.5% and 1.76x of its global healthcare REIT peers.
17
First REIT│Singapore
March 13, 2015
Figure 31: CIMB REIT/BT Overview
SREIT
Hospitality
Ascott Residence Trust
Ascendas Hospitality Trust
CDL Hospitality Trust
Far East Hospitality Trust
Frasers Hospitality Trust
OUE Hospitality Trust
Industrial
AIMS AMP
Ascendas REIT
Cache Logistics Trust
Cambridge Industrial Trust
Keppel DC REIT
Mapletree Industrial Trust
Mapletree Logistics Trust
Sabana Shariah
Soilbuild Business Space REIT
Viva Industrial Trust
Office
Capitacommercial Trust
Frasers Commercial Trust
Keppel REIT
OUE Commercial REIT
Retail
CapitaMall Trust
Frasers Centrepoint Trust
Mapletree Commercial Trust
SPH REIT
Starhill Global REIT
Suntec REIT
Retail Ex-Sin
CapitaRetail China Trust
Croesus Retail Trust
Lippo Malls Indonesia Retail Trust
Mapletree Greater China
Healthcare
First REIT
Parkway Life REIT
Religare Health Trust
Bloomberg
Ticker
Price as at Mkt Cap
13 Mar 15 (US $m)
Last
reported
asset
leverage
Last
stated
NAV
Price /
Stated
NAV
Target
Price
(DDMbased)
Rec.
2015
Yield
2016
Yield
ART SP
ASCHT SP
CDREIT SP
FEHT SP
FHT SP
OUEHT SP
Simple Average
$1.27
$0.69
$1.72
$0.82
$0.90
$0.93
$1,418
$554
$1,223
$1,052
$770
$894
38.5%
38.3%
31.7%
31.4%
40.0%
32.7%
35.4%
1.37
0.73
1.65
0.98
0.86
0.90
0.93
0.95
1.04
0.83
1.04
1.03
0.97
$1.30
NA
$1.89
$0.77
NA
$1.01
H
NR
H
H
NR
A
7.0%
8.5%
6.9%
6.4%
na
7.6%
7.3%
6.9%
8.7%
7.2%
6.6%
na
8.1%
7.5%
AAREIT SP
AREIT SP
CACHE SP
CREIT SP
KDCREIT SP
MINT SP
MLT SP
SSREIT SP
SBREIT SP
VIT SP
Simple Average
$1.46
$2.47
$1.16
$0.70
$1.04
$1.53
$1.22
$0.91
$0.81
$0.81
$658
$4,315
$656
$645
$659
$1,934
$2,192
$475
$474
$366
31.7%
33.6%
34.9%
34.8%
27.8%
32.8%
34.7%
38.0%
35.4%
44.3%
34.8%
1.53
2.03
0.98
0.68
0.87
1.21
0.98
1.04
0.80
0.76
0.95
1.22
1.18
1.02
1.19
1.26
1.24
0.87
1.01
1.07
1.09
NA
$2.41
$1.34
$0.69
NA
$1.66
$1.30
NA
NA
$0.87
NR
H
A
H
NR
A
H
NR
NR
A
7.8%
6.1%
7.7%
7.2%
na
6.8%
6.7%
8.6%
7.2%
8.6%
7.4%
7.9%
6.4%
8.4%
7.3%
6.7%
7.1%
6.9%
na
7.4%
8.8%
7.4%
CCT SP
FCOT SP
KREIT SP
OUECT SP
Simple Average
$1.70
$1.46
$1.22
$0.80
$3,637
$722
$2,814
$504
29.3%
37.2%
43.3%
38.3%
37.0%
1.71
1.59
1.41
1.10
0.99
0.92
0.87
0.72
0.88
$1.69
$1.54
$1.22
$0.93
RD
H
H
A
5.2%
6.5%
5.7%
6.7%
6.0%
5.4%
6.5%
5.7%
6.6%
6.1%
CT SP
FCT SP
MCT SP
SPHREIT SP
SGREIT SP
SUN SP
Simple Average
$2.07
$2.01
$1.53
$1.04
$0.83
$1.86
$5,205
$1,337
$2,346
$1,895
$1,290
$3,385
33.8%
29.3%
37.9%
26.0%
28.6%
34.7%
31.7%
1.79
1.77
1.17
0.93
0.94
2.09
1.16
1.14
1.31
1.11
0.88
0.89
1.08
$2.18
$2.20
$1.54
$1.03
$0.88
$1.93
H
A
H
H
A
H
5.4%
5.9%
5.2%
5.3%
6.3%
5.5%
5.6%
5.5%
6.1%
5.3%
5.5%
6.4%
5.8%
5.8%
CRCT SP
CRT SP
LMRT SP
MAGIC SP
Simple Average
$1.63
$0.94
$0.35
$1.04
$974
$350
$677
$2,032
28.7%
41.8%
26.7%
37.9%
33.8%
1.58
0.92
0.45
1.06
1.03
1.03
0.77
0.98
0.95
NA
$1.10
$0.40
NA
NR
A
A
NR
6.7%
7.9%
9.3%
6.4%
7.6%
6.9%
8.0%
9.4%
6.6%
7.7%
FIRT SP
PREIT SP
RHT SP
Simple Average
Simple average for SIN
$1.35
$2.34
$1.06
$726
$1,028
$609
33.1%
35.2%
15.2%
27.8%
33.9%
1.02
1.68
0.87
1.33
1.39
1.22
1.31
1.06
$1.48
$2.60
$1.06
A
A
H
6.5%
5.9%
7.5%
6.6%
6.7%
6.6%
5.4%
8.2%
6.7%
6.8%
SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG
MREIT
Figure 32: Healthcare REITs Overview
Retail
Capitamalls Malaysia Trust
IGB REIT
Healthcare
Sunway REITREITs
Pavilion REIT
First REIT
Parkway
IndustrialLife REIT
Sabra Health Care REIT Inc
Axis REIT
LTC Properties Inc
National Health Investors Inc
Medical Properties Trust Inc
Healthcare Realty Trust Inc
Healthcare Trust of America In
Generation Healthcare REIT
Bbg Code
Price as at Mkt Cap
13 Mar 15 (US $m)
Last
reported
asset
leverage
CMMT MK
$1.49
$719
27.2%
as
IGBREIT MKPrice (LC)
$1.32
$1,236
26.0%
at
Mkt
Cap
(LC
Target
Price
SREIT MK
$1.51
$1,235
18.7%
Bbg Code
15
$m)
(DDM-based)
PREIT MK 12 Mar$1.57
$1,250
33.4%
FIRT SP
$1.35
$726
$1.48
Simple
Average
26.3%
PREIT SP
$2.34
$1,028
$2.60
SBRA US
$31.48
$1,865
NA
AXRB MK
$3.60
$535
34.5%
LTC US
$1,544
NA
Simple
Average $43.43
34.5%
NHI US
$68.52
$2,574
NA
Simple average for MAL
28.0%
MPW US
$14.36
$2,997
NA
Simple average for ALL
33.0%
HR US
$26.73
$2,657
NA
HTA US
$26.97
$3,376
NA
GHC AU
$1.57
$214
NA
Simple Average
Last
stated
NAV
1.15
1.00
0.95
Rec.
1.10
A
A
NR
2.17
NR
NR
NR
NR
NR
NR
Price /
Stated
NAV
Target
Price
(DDMbased)
Rec.
1.30
$1.62
NR
1.32
$1.35
NR
2015
P/BV
1.59
$1.50
NR
1.43 (x) $1.532015 Yield
NR
6.5%
1.41 1.35
1.38
5.9%
1.83
na
1.66
$3.85
NR
na
1.66 na
2.28
na
1.46
1.30
na
1.12
2.28
na
2.34
na
1.36
na
1.76
na
2015
Yield
2016
Yield
6.5%
7.0%
5.7%
5.8%
5.4%
5.5%
2016
6.0% Yield6.5%
6.6% 6.2%
5.9%
5.4%
5.2%
5.7%
5.9%
5.2% 5.9%
5.7%
5.1%
5.9%
6.1%
6.7%
6.6%
6.7%
4.7%
4.6%
5.8%
5.5%
SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG
18
First REIT│Singapore
March 13, 2015
6. RISKS
Concentration risks
FIRT is heavily reliant on its Indonesian healthcare properties and on rental
payments from the master lessee as FIRT does not directly operate the
properties. As such, any circumstance that adversely affects the operations of
Indonesian hospitals or the master lessee’s ability to make rental payments will
impact FIRT’s distributions.
Land title risk
In Indonesia, a Hak Guna Bangunan (HGB) title is the closest thing the
country has to the internationally-recognised concept of ‘leasehold’ title. A
holder of the HGB title has the right to erect, occupy and use buildings on a
parcel of land and to sell all or part of such parcel. So far, the HGB titles have
been extended upon expiry for several hospitals in 2012-2013. There is no
assurance that there will be approvals for such renewals or extensions in the
future, which could adversely affect the operations and FIRT’s ownership of the
properties.
Acquisition quality
FIRT is likely to acquire healthcare assets around Asia that are deemed to be
income-producing for its portfolio in order to grow inorganically. However,
sometimes the added income produced by the property might not be able to
fully compensate for the additional shares issued in order to fund the
acquisition, thus leading to a lower DPU in the short run. However, FIRT’s
strong management and close links to the Lippo Group in Indonesia should
ensure that it has a stream of value-adding properties in the pipeline, which
minimises the risk of a lower DPU due to acquisitions.
Management fees payable in units
FIRT has been paying out ~74% of its management fees in units for the past
two years and we assume it will retain this rate. If the management switches to
100% or 50% of fees payable in cash from 2015 onwards, the impact to FIRT’s
target price and FY15 and FY16 DPUs will be limited to ±3%.
Figure 33: Sensitivity of DPU and target price to % of fees payable in units
% of fees payable in units
100%
90%
80%
74%
70%
60%
50%
FY15 DPU
3.6%
2.2%
0.8%
0.0%
-0.6%
-1.9%
-3.3%
FY16 DPU
3.5%
2.2%
0.8%
0.0%
-0.5%
-1.9%
-3.2%
TP
3.2%
2.0%
0.7%
0.0%
-0.5%
-1.7%
-3.0%
SOURCES: CIMB, COMPANY REPORTS
Gearing limit
The Collective Investment Schemes (CIS) code by MAS allows FIRT to borrow
up to 35% of its deposited property without a credit rating and up to 60% if a
credit rating is obtained and disclosed. We believe that FIRT is likely to keep its
gearing below 35% in the near term.
19
First REIT│Singapore
March 13, 2015
7. SWOT ANALYSIS
Figure 34: SWOT Analysis
Strengths
Opportunities
Most of FIRT’s assets are strategically located in
parts of Indonesia with large catchment of potential
patients.
Experienced management team
Well-equipped faclities with state-of-the-art equipment
Siloam Hospitals have strong reputation and
operating expertise in Indonesia
Multi-billion dollar investment plan by the Indonesian
government started in 1 Jan 2014 which will give
many people first-time access to healthcare services.
Plenty of room to grow - hospital bed and doctor-topopulation ratio far below global average.
Weaknesses
Threats
Heavy dependence on Indonesia's healthcare market
and Sponsor.
Improper execution of the government’s healthcare
plan could lead to lower-than-expected revenue.
Political upheavals, natural disasters, insurgency
movements, riots and governmental policies.
SOURCES: CIMB, COMPANY REPORTS
20
First REIT│Singapore
March 13, 2015
8. APPENDICES
Management team
CEO and executive director: Dr Ronnie Tan Keh Poo
Dr Ronnie has been a director and CEO of Bowsprit since May 2006. Currently,
he holds the posts of non-executive director and audit committee member of
Auric Pacific Group Ltd. Previously, he served as CEO and director of
AsiaMedic Ltd and senior executive in Parkway Holdings Ltd from 1998 to
September 2004. He was also an executive director of Auric Pacific Group Ltd,
responsible for the areas of business development as well as property and
strategic investments, from October 2004 to July 2009. He also has experience
working as a medical practitioner in various healthcare facilities in Australia
and Singapore.
CFO: Mr Tan Kok Mian, Victor
Mr Tan has been the CFO of Bowsprit since July 2008 and was previously
senior finance manager, responsible for financial operations in Bowsprit. Prior
to that, he was at Parkway Holdings Ltd from 1997 to 2008, where he rose
through the ranks as an accountant to become financial controller. Mr Tan also
holds a professional qualification from the Association of Chartered Certified
Accountants (ACCA).
Senior asset and investment manager: Mr Chan Seng Leong, Jacky
Mr Chan has over 20 years of experience in the property sector and is a
member of the Singapore Institute of Surveyors and Valuers as well as a
licensed appraiser (lands and buildings). Prior to joining Bowsprit, he was with
Ascendas-MGM Funds Management Ltd and was the investment manager for
Ascendas Real Estate Investment Trust, where he spearheaded
multimillion-dollar real estate acquisitions and performed many other roles
related to property valuation and investment. Mr Tan has a Master of Science
(real estate) degree from the National University of Singapore and a Master in
Business Administration degree from the University of Australia, Graduate
School of Management.
21
First REIT│Singapore
March 13, 2015
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AAV, ADVANC, AMATA, ANAN, AOT, AP, ASP, BANPU, BAY, BBL, BCH, BCP, BEC, BECL, BGH, BH, BIGC, BJC, BJCHI, BLA, BLAND, BMCL,
BTS, CENTEL, CK, CPALL, CPF, CPN, DCC, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, ESSO, GFPT, GLOBAL, GLOW, GUNKUL,
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WHA.
Corporate Governance Report:
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the
policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the
Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public
investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may
24
First REIT│Singapore
March 13, 2015
be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.
Score Range:
Description:
90 - 100
Excellent
80 - 89
Very Good
70 - 79
Good
Below 70 or
N/A
No Survey Result
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Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2014
1586 companies under coverage for quarter ended on 31 December 2014
Rating Distribution (%)
Investment Banking clients (%)
Add
58.4%
6.0%
Hold
29.4%
4.3%
Reduce
12.2%
1.0%
Spitzer Chart for stock being researched ( 2 year data )
25
First REIT│Singapore
March 13, 2015
First REIT (FIRT SP)
Price Close
1.500
1.400
1.300
1.200
1.100
1.000
0.900
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014.
AAV – Very Good, ADVANC – Very Good, AEONTS – not available, AMATA - Good, ANAN – Very Good, AOT – Very Good, AP - Good, ASK – Very Good,
ASP – Very Good, BANPU – Very Good , BAY – Very Good , BBL – Very Good, BCH – not available, BCP - Excellent, BEAUTY – Good, BEC - Good, BECL –
Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC – Good, BLA – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Good,
CENTEL – Very Good, CHG – not available, CK – Very Good, CPALL – not available, CPF – Very Good, CPN - Excellent, DELTA - Very Good, DEMCO – Good,
DTAC – Very Good, EA - Good, ECL – not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA Excellent, HEMRAJ – Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Good, IVL - Excellent, JAS – not available, JUBILE –
not available, KAMART – not available, KBANK - Excellent, KCE - Very Good, KGI – Good, KKP – Excellent, KTB - Excellent, KTC – Good, LH - Very Good,
LPN – Very Good, M - not available, MAJOR - Good, MAKRO – Good, MBKET – Good, MC – Very Good, MCOT – Very Good, MEGA – Good, MINT Excellent, OFM – Very Good, OISHI – Good, PS – Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH – Very Good,
RATCH – Very Good, ROBINS – Very Good, RS – Very Good, SAMART - Excellent, SAPPE - not available, SAT – Excellent, SAWAD – not available, SC –
Excellent, SCB - Excellent, SCBLIF – Good, SCC – Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA – Very Good, STEC - Good,
SVI – Very Good, TASCO – Good, TCAP – Very Good, THAI – Very Good, THANI – Very Good, THCOM – Very Good, THRE – not available, THREL – Good,
TICON – Good, TISCO - Excellent, TK – Very Good, TMB - Excellent, TOP - Excellent, TRUE – Very Good, TTW – Very Good, TUF - Good, VGI – Very Good,
WORK – not available.
CIMB Recommendation Framework
Stock Ratings
Definition:
Add
The stock’s total return is expected to exceed 10% over the next 12 months.
Hold
The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce
The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward
net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand,
Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were
based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months.
Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy:
expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on
Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or
more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total
returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected
negative total returns of 10% or more over the next 3 months.
26