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First REIT: 2Q 2011 results.

Friday, July 22, 2011


First REIT's results are more or less in line with forecast with a DPU of 1.58c for 2Q 2011. The REIT will go XD on 28 July and income distribution is payable to unitholders on 29 August.

The REIT's strong numbers have been mentioned before and here's the update:

NAV/unit: 78c
Interest cover ratio: 15x
Gearing: 13.8%

I am pleasantly surprised that its management is planning to have a special non-recurring dividend to be paid from its divestment gain resulting from the sale of its Adam Road property. This could translate into an additional one off DPU of more than 1c in future.

Low gearing, high interest cover ratio and a distribution yield of almost 8% with a special dividend to boot. This REIT is rock solid and remains one of my best investments in years.

One of my best investments it might be but it would not pay to fall in love with it. Even great investments would not see share prices go up in a straight line. They climb a wall of worries. However, today's white candle was formed on the back of very high volume and we could see price pushing even higher in the next session. 85c next? Possibly.

Weekly


Daily


With price pushing beyond the upper Bollinger band, a pull back to supports would be a natural course. When? I would suspect it could happen when the counter goes XD. Immediate support at 80c? Or perhaps 79c? That's where the Fibo lines are on the daily chart.

Good luck to fellow unitholders.

See announcement here.
See presentation slides here.

Related post:
First REIT: Yield accretive purchase in South Korea.

14 comments:

Gregg said...

Hi AK

Something to ask for its financial data (still learning how to interpret it).

Net Property Income: $13,103:
Distributable Income $9,895:
Net Cash flows from the operating activities (after) incomes taxes paid): $8,416

How they can pay out the dividend since Net Cash < Dividend.
Which data should we look at if we want to verify is the REIT able to sustain their quarterly distribution. Cash flow or Net Property income?

Net Property income: Q2 is slightly lower than Q1, $13,103 Vs $14,478, No repayment of borrowings in Q2 and not too sure what is the distribution for the newly acquisition of Sarang Hospital that will take effective in Q3. I would think Q3 DPU probably will still maintain at 1.58.

AK71 said...

Hi Gregg,

The number you want to look at is "distributable income".

Most S-REITs pay out at least 90% of their distributable income to unitholders either quarterly or half yearly.

I agree that 3Q 2011 DPU is probably going to be similar to 2Q 2011. Even if its recent South Korean acquisition were to contribute to its income right away, I estimate the impact to be about positive 2% only which means DPU could be 1.61c instead of 1.58c.

Of course, there is that promised one off special dividend from the divestment of its Adam Road property to look forward too as well. That could be in the region of 1c or more per unit. ;)

Gregg said...

Honestly speaking,I would expect higher DPU in Q2 at least meeting what was forecasted 1.6/qtr in the last right issue offer.

No major change in Q2 NAV vs Q1Nav, to be surprise,it's price pop up again today! we got to be more cautious as current price is considered overprice.

AK71 said...

Hi Gregg,

Indeed. The REIT is now trading a few cents higher than the fair value I ascribed it after its rights issue. This is why I am planning to divest partially again.

Sell at a price we would not buy at and buy at a price we would not sell at. Sounds simple but is it? ;)

Gregg said...

Hi AK,

Unless you divest a lot of "lots" uotherwise the profit only few hundred bucks,might as well hold it...this is my turtle investment style due to my small capital.

It was a bit late fo me to discover First REIT 2 years ago,my first entry price was 0.82 (before right),with accepted the right issue, this counter become my largest Paper Gain in my portfolio as of today.

My worst mistake was pumping $$$ to FSL Trust for the sake of cost averaging down....:(

I totally agree that taking profit is always right thing to do.

AK71 said...

Hi Gregg,

First REIT is my third largest investment, after AIMS AMP Capital Industrial REIT and Sabana REIT. Even after a partial divestment, it is still sizeable although it could fall to 4th position, after LMIR.

Anyway, I will only be divesting those I bought at 73c about 3 months or so ago. Those I bought during the last bear market at 42c and those I bought when it issued rights at 50c, I will probably be keeping for a while more.

FSL Trust? Would you believe that I still have those I bought at $1 a piece years ago? Lessons...

Gregg said...

Hi AK,

Wow, $1 for FSL Trust, it is superb high, big lesson.
Its management is much worse off compare to their competitor pacific Shipping Trust which able to increase their DPU in the latest quarterly result.

By looking at the DPU, it is about 7~8% for my average price and 13% for the current price. Hopefully things will change after acquiring another 2 ships....

First REIT's parent company Lippo karawaci and Lippo from LMIR, are they same company? Any relationship?

I only know Lippo Karawaci is one of largest property company in Indonesia, but commision fees of investing indonesia stock market is much expensive compare to Singapore/Malaysia, otherwise, i would happy to become a small investor.

AK71 said...

Hi Gregg,

FSL Trust is a self-liquidating trust and is probably doomed to fail in the longer term. Those units I bought at $1 a piece are as good as written off.

I might go into FSL Trust for short term trades but not long term investment:

FSL Trust: Where to from here?

Lippo Group is the sponsor for both LMIR and First REIT. You are right. :)

Hong Wei said...

Hi AK

Any thoughts on the effect on First REIT if US were to default? The interest rate are foreseen to rise in case of default. How will this affect the SOR rate in which First REIT borrows money? Will this be counteracted by the fall in USD?

AK71 said...

Hi Hong Wei,

If USA is unable to raise its debt ceiling, not only First REIT will suffer, global equities market will be hit badly. Whether short or long term, I do not know, but there will be shockwaves through the system.

Cost of borrowing will go up in such an instance. Carry trade will reduce somewhat depending on how much interest rate in the USA goes up to. This is my guess.

First REIT, specifically, however, has strong fundamentals. With gearing so conservative, it should remain a safe investment. FA is about value. TA is about price. So, this does not mean that its unit price will not suffer a blow. ;)

Good luck to us all. :)

Anonymous said...

Hi Ak;
I have also noted the vuluation of sg property in First Reit had drop by 2mil; any cause for concern?
Spencer

AK71 said...

Hi Spencer,

For me, it is always the per unit numbers which interest me. So, I would look at NAV/unit.

That First REIT is now trading quite a few cents above NAV/unit suggests some caution is necessary.

jason said...

Hey AK, quite a good visit report on First REIT:
http://remisiers.org/cms_images/research/Research-Oct4-Oct7_2011/firt100511.pdf

AK71 said...

Hi Jason,

Thanks for sharing the link. First REIT is very reliable and high yielding passive income generator. :)

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