First REIT - OCBC Investment 2023-11-02: Stable & Defensive

• First REIT declared a DPU of 0.62 Singapore cents for 3Q23, unchanged from 1Q23 and 2Q23, but down 6.1% y-o-y due to higher finance costs, depreciation of IDR and JPY against S$, and an enlarged unit base.
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Healthy underlying growth despite FX headwinds

• First REIT (SGX:AW9U)’s 9M23 rental income grew 0.6% y-o-y to S$81.4m, largely underpinned by a 29.2% y-o-y increase in rental income from its newly acquired nursing homes in Japan. In local currency terms, rental income from its portfolio in Indonesia and Japan were up by a robust 8.8% and 41.9%, respectively.
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Credit metrics remain stable

• First REIT’s gearing has nudged upwards to 39.0% from 38.7% as at 30 Jun 2023, due to unfavourable FX fluctuations weighing on property valuations when they are translated back to S$ terms.
• First REIT's management shared that for its year-end property revaluation exercise, it is expecting its portfolio valuations in Singapore and Japan to remain flattish overall, while valuation of its properties in Indonesia is expected to increase in local currency terms on the back of favourable rental escalation terms in its master lease agreements.
• All-in cost of debt increased by 10 basis points (bps) to 5.0%, and is expected to remain stable for the rest of the year given that 85.9% of debt are on fixed rates or hedged. Management guided that every 100bps increase in interest costs will weigh on distributable income by S$0.7m.

No refinancing requirement until 2026

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Ada Lim OCBC Investment Research | https://www.iocbc.com/ 2023-11-02 SGinvestors.io

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