<Results First Take> FY23/4Q23 results in-line, watch for divestment
- FY23/4Q23 DPU of 2.48/0.62 Scts are in-line, with higher financing costs and negative FX impact yoy
- Key positives: (i) Siloam’s +18% revenue growth yoy in 9M23 to drive higher rentals next year, (ii) stable valuations with gearing ratio at 38.7%, (iii) stable interest cost at 5.0%
- Key catalyst to watch: Divestment of non-core asset, expected this year
- Overall, results were in line. We currently have a BUY recommendation with TP of S$0.30. More updates after analyst briefing.
FY23/4Q23 results in-line. FY23 gross rental and NPI of S$108.6m and S$105.3m saw -2% and -3% impact yoy due to depreciation of foreign currencies (IDR and JPY), aligned with our estimates. FY23 distributable amount and DPU saw -2% and -6% yoy impact due to higher finance costs and negative FX impact, with DPU also impacted by an enlarged unit base. 4Q23 and FY23 DPU came in at 0.62 and 2.48 Scts respectively, in-line with our estimates, with 4Q23’s DPU stable with its three preceding quarters.
Key metrics remain healthy; Watch for divestment. Operationally, hospital operations in Indonesia remains healthy, with Siloam reporting a firm 18% revenue growth yoy in 9M23 on the back of higher patient volume and higher average revenue per day, aligned with consensus estimates. Among the Siloam hospitals owned by First REIT, 9M23 hospital revenue grew by +14% yoy on average, with notable hospital revenue growth from Simatupang (+21% yoy, 5% contribution to total Indonesia rental income) and Makassar (+19% yoy, 8% contribution) as well as First REIT’s two largest contributor Siloam Hospitals Lippo Village (20% contribution) at +14% yoy and MRCC (16% contribution) at +12% yoy. We expect positive momentum in hospital operations to continue, with Siloam contributing to a greater pie to First REIT’s Indonesian rental income (FY23 at 56%, up from FY22 of 44%), driving more hospitals to pay performance-based rents. Post Siloam’s results, consensus has turned more positive on Siloam with positive revisions in FY23F-25F revenue and net income estimates at +1-3% and +6-7% respectively, a positive signal. Separately, First REIT’s balance sheets remains healthy, with 2H23 gearing ratio remaining unchanged at 38.7% with stable all-in interest rate cost of 5.0% (unchanged qoq). Portfolio valuations were resilient as anticipated at S$1.14bn with a -0.5% yoy impact, boosted by higher rental income in Indonesia but offset by negative FX impact in Indonesia and Japan. Going forward, we continue to watch for the divestment of Imperial Aryaduta Hotel & Country Club (lease renewed at flattish terms for a year until Dec 2024), with capital likely to be used to fund acquisitions into developed markets (e.g., Australia). We currently have a BUY recommendation and TP of S$0.30. First REIT is currently trading at attractive valuations at forward P/B of 0.86x (at -1SD of historical average of 1.0x) whilst offering attractive forward dividend yields of 10% (+1SD of historical average yields of 8%). More updates to follow after analyst briefing.
| Dec (S$m) | 1H22 | 2H22 | 1H23 | 2H23 | HoH | YoY | 22 | 23 | YoY |
| Gross revenue | 53.787 | 57.488 | 53.989 | 54.579 | 1.1% | -5.1% | 111.275 | 108.568 | -2.4% |
| NPI | 52.724 | 55.835 | 52.429 | 52.905 | 0.9% | -5.2% | 108.559 | 105.334 | -3.0% |
| DI | 25.254 | 27.146 | 25.511 | 25.912 | 1.6% | -4.5% | 52.400 | 51.423 | -1.9% |
| DPU (Scts) | 1.32 | 1.32 | 1.24 | 1.24 | 0.0% | -6.1% | 2.64 | 2.48 | -6.1% |
| NAV per share (Scts) | 33.85 | 30.70 | 31.02 | 30.18 | -2.7% | -1.7% | 30.70 | 30.18 | -1.7% |
| NPI Margin % | 98.0% | 97.1% | 97.1% | 96.9% | 97.1% | 96.9% | |||
| Gearing % | 35.6% | 38.5% | 38.7% | 38.7% | 38.5% | 38.7% | |||
| Cost of debt (%) | 3.7% | 3.7% | 4.9% | 5.0% | 3.7% | 5.0% |
Source: Company, DBS Bank