- First REIT (SGX:AW9U)’s 1H23 results met our expectations. Rental income grew 0.4% y-o-y to S$54m, while net property income (NPI) declined 0.6% y-o-y to S$52.4m.
- Improvements in rental income from its portfolios in Indonesia and Singapore, as well as a first full half-year contribution from all 14 nursing homes that First REIT had acquired in Japan last year were offset by the depreciation of IDR and JPY against S$, and higher finance costs.
- - Read this at SGinvestors.io -
- After taking into account a larger unit base (as First REIT had issued 432.1m units in early Mar 2022 to partially fund its maiden foray into Japan), First REIT’s 2Q23 DPU of 0.62 Singapore cents was down 6.1% y-o-y, but remained unchanged q-o-q.
- - Read this at SGinvestors.io -
Gearing ratio decreased slightly to 38.7% with 86.0% of debt on fixed rate or hedged and all-in cost of debt at 4.9%
- First REIT’s credit metrics have improved slightly, in our view. As at 30 Jun 2023, First REIT’s gearing ratio stood at 38.7%, a slight improvement from the 39% reported as at 31 Mar 2023, in part due to higher carrying value of its investment properties.
- All-in cost of debt increased by 20 basis points (bps) to 4.9%, but we note that this could be due to the continued improvement in the proportion of debt on fixed rates or hedged from 62.8% as at 31 Mar 2023 to 86.0% as at 30 Jun 2023. Management shared that cost of debt is likely to remain at around these levels for the rest of the year.
- During the quarter, First REIT carried out an early refinancing of its JPY-denominated Tokutei Mokuteki Kaisha (TMK) bonds, which were originally due in May 2025, terming it out to 2030. As a result, weighted average debt to maturity has increased to 4.1 years as at 30 Jun 2023.
- First REIT has no refinancing requirements until May 2026. Interest coverage ratio dipped slightly to 4.1x from 4.2x on 31 Mar 2023, but remains at a healthy level.
Maintain fair value estimate of S$0.30
- Read more at SGinvestors.io.
