First REIT: 1Q FY2011, Prospects Looking Up!

First REIT announced 1Q FY2011 results earlier today after markets closed. Our hopes for a special bumper distribution were like what Singaporeans like to say, "crushed like a cockroach." Distribution per unit (“DPU”)  was also lower y-o-y on a quarterly basis due mainly to the dilutive 5-for-4 rights issue in Dec 2010. This was because the increase in distribution due to the maiden contributions from the newly acquired Mochtar Riady Comprehensive Cancer Centre and Siloam Hospitals Lippo Cikarang were not sufficient to offset the dilutive effects of the rights issue.

Now that the bad news are out of the way, let us try to look for some positives in the results announcement. Firstly, management reiterated their aim to raise its asset base from the current S$584.6 million to S$1 billion in the next two to three years. This implies that we can anticipate more upcoming acquisitions to be made shortly (likely in Indonesia) and correspondingly, significant increases to subsequent distributions.

Secondly, management commented that divestment of the proposed Pacific Cancer Centre @ Adam Road (“PPCC”) has lowered First REIT‟s gearing to a low 13.8%! Meaning that the company can afford to go on the above mentioned acquisition spree without the need for more dilutive rights issues.

Thirdly, the announced DPU for quarter came in at a decent 1.58 cents, which still translate to an attractive annualized yield of about 8.66% (certainly beats the "red-hot" Hyflux Preference Shares hands down!)

Going forward, the prospects of First REIT certainly does look bright for the Kiasu Investor!

Link to presentation slides.