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First REIT: DPU to increase!

Wednesday, March 27, 2013

First REIT is going to acquire two new hospitals in Indonesia for $190.4 m.

1. Siloam Hospitals Bali.
Purchase price: $97.3 m.
Annual base rent: $9.7m.
Financed by a drawdown of committed debt facility.

2. Siloam Hospitals TB Simatupang (South Jakarta).
Purchase price: $93.1 m.
Annual base rent: $9.3m.
Financed by a combination of a drawdown of committed debt facility and issuance of new units to the REIT's sponsor.

For anyone investing for income, an important question is how would these actions affect the DPU?

Well, even with the issuance of new units to the REIT's sponsor, unitholders will still enjoy a 5.47% increase in DPU on a per annum basis. The estimated full year DPU including these acquisitions is 6.94c.

Mr. Market certainly likes the news as the REIT's unit price rose 3.5c to close at $1.23 per unit. At this price, the projected distribution yield is 5.64%.

Yield has certainly compressed very much compared to those days when I bought at between 42c to 76c per unit.

So, is it still good to buy at current prices? It would depend on what is our definition of "good".

See announcement: here.

Related posts:
1. REITs: When to buy?
2. Do not love unless it is worth the loving.


Hong Wei said...


Does the pro forma DPU for 2012 include the full year contribution from the Nov 2012 purchases? My understanding is it does not. Ie: The pro forma numbers only adjust for the proposed acquisition

If so, the expected DPU will be higher, somewhere around the 7.3c region

Poh Soon said...

Seeing that the price go above 1.2, I had since sold another 30% of my First REIT holding, to lock in some profit, as well as to reduce my exposure to equity.

AK71 said...

Hi Hong Wei,

I think the post acquisitions DPU was calculated as if the REIT had held the newly acquired properties from 1 Jan 12 to 31 Dec 12.

Anyway, I will be quite happy if you are right and I am wrong on this. :)

AK71 said...

Hi Poh Soon,

Made good money, I am sure. Congratulations. :)

Cory said...

If the broad market maintain for another year, we may run out of investment products ....

Poh Soon said...

Hi AK,

It is indeed good money made. With the latest selling, the remaining of my First Reit is now FOC.

AK71 said...

Hi Cory,

I rather doubt it. There will always be things to invest in. ;)

AK71 said...

Hi Poh Soon,

FOC. I like the sound of that. ;)

Unknown said...

First REIT an all time high now. Seriously tempted to sell but what can I do with the money? Rot in the bank? Until I find a derivative with better returns I will just watch the price rocket or plummet and regret not selling. LOL


AK71 said...

Hi Derek,

Indeed, what should we do with the money if we were to sell our investment in First REIT? Could we find a better investment? I wonder... ;)

Derek said...

Hi AK,

How about a certain Marco Polo? :P

钢铁侠 said...

HI Ak,

I am wonder why the acquisitions come so frequent, just completed 2 last Nov then, another 2 this month... feeling fishy here......

Hope Korea expansion (still waiting until long neck) will provide another catalyst...

P/s: vested since the right issues.

AK71 said...

Hi Derek,

Hahaha... OK, you got me. ;p

I have, by now, built a large position in Marco Polo Marine.

I believe that Marco Polo Marine could outperform my investments in S-REITs this year.

However, the quarterly income distributions from most of the S-REITs I am invested in and the relatively higher yields are keeping me from divesting in a big way.

AK71 said...

Hi Tan,

Well, I am quite sanguine about it. As long as it benefits unit holders, I don't have a problem with the acquisitions.

Of course, with the latest acquisitions, we see gearing near 35%. So, we could see some fund raising by the REIT in future.

AK71 said...

We raise our FY13 and FY14 DPU estimates by 5.9% and 13.2%,
respectively, as we incorporate contribution from the assets in our
forecasts... raise FY13F gearing ratio to 34.0%...

OCBC Research, 4 April 2013.

AK71 said...

First REIT (FREIT) reported that its gross revenue for 1Q13 increased 25.0% YoY to S$17.5m. This was driven largely by a full quarter of contribution from the two properties it acquired on 30 Nov 2012.

Distributable amount to unitholders and DPU increased by 16.5% and 9.4% YoY to S$11.6m and 1.74 S cents, respectively, if
we exclude a special distribution of S$2.2m (S$0.34 per unit) in 1Q12 which arose from a gain from the sale of the Adam Road property.

The ex-dividend date for the
distribution is on 29 Apr at 9 a.m., while the date payable is on 30 May.

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