First REIT - OCBC Investment 2024-02-21: Stable Condition

• First REIT (SGX:AW9U)’s FY23 rental income and net property income (NPI) dipped 2.4% and 3% y-o-y to S$108.6m and S$105.3m, respectively.
• However, performance of the underlying properties remained stable, as revenue from Indonesia and Japan grew by 7.6% and 28.8% y-o-y, respectively, on a local currency basis and without taking into account rental straight-lining adjustments.

Stable 4Q23 DPU of 0.62 Singapore cents

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• Altogether, First REIT's FY23 distributable income slipped 1.9% y-o-y to S$51.4m; accompanied with a larger unit base, full year DPU was down 6.1% y-o-y to S$0.0248. This constituted 100% of our forecast, meeting our expectations.
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Credit metrics remain stable

• On the balance sheet front, First REIT’s gearing ratio remained healthy, improving by 0.3 percentage points (ppt) from 39% as at 30 Sep 2023 to 38.7% as at 31 Dec 2023.
• Lower total debt following the repayment of loans in Oct 2023 more than offset a slight 0.5% y-o-y decline in portfolio valuation to S$1.14b due to a weaker JPY. All-in cost of debt remained stable at 5% q-o-q, with 87.2% of debt on fixed rates or hedged.
• First REIT's management shared that every 50bps increase in all-in cost of debt will weigh on distributable income by S$0.3m.

Committed to its 2.0 Growth Strategy

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Ada Lim OCBC Investment Research | https://www.iocbc.com/ 2024-02-21 SGinvestors.io

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