OCBC Investment Research
30 April 2025
First REIT: Resilient Healthcare REIT Eyes Growth Amid Currency Headwinds – Analysis, Outlook & Catalysts
Overview: First REIT’s Performance and Investment Thesis
First REIT, a Singapore-listed healthcare real estate investment trust, continues to deliver resilient performance despite persistent forex pressures. With a diversified portfolio across Singapore, Japan, and Indonesia, First REIT stands out for its long weighted average lease expiry (WALE) of 10.6 years (as of 31 Dec 2024), ensuring stable cash flow visibility. The REIT’s well-structured master leases feature built-in rental escalation clauses, offering potential for rental growth and upside sharing with tenants.
Structural megatrends such as Asia’s ageing demographics and the rising demand for quality healthcare underpin robust demand for First REIT’s assets. Under its “2.0 Growth Strategy,” the trust is targeting further tenant and geographic diversification, which is set to enhance its risk profile and unlock new growth opportunities.
Recent Developments: Strategic Moves and Portfolio Review
At the start of 2025, First REIT received a preliminary non-binding letter of intent from PT Siloam International Hospitals Tbk (Siloam) to acquire its Indonesian hospital asset portfolio. The REIT is currently conducting a strategic review to assess this offer and explore its strategic options—a potential near-term catalyst that investors should watch closely.
1Q25 Financial Highlights: Stable Distributions Amid Currency Pressures
- 1Q25 distribution per unit (DPU) stood at 0.58 Singapore cents, down 3.3% year-on-year but stable quarter-on-quarter, aligning with expectations.
- Rental income and net property income (NPI) both declined 2.8% YoY to SGD25.4 million and SGD24.6 million, respectively, mainly due to further depreciation of the Indonesian Rupiah (IDR) and Japanese Yen (JPY) against the Singapore Dollar (SGD).
- In local currency terms, Indonesian rental income would have grown 5.5% YoY to IDR189.1 billion, while Japanese rental income remained flat at JPY37.7 million. Singapore assets achieved a 2% YoY increase in rental income to SGD1.1 million.
- 1Q25 distributable amount declined by 2.2% YoY to SGD12.2 million, translating to a DPU annualized yield of approximately 9.1% based on the closing price of SGD0.255 as at 29 April 2025. The distribution is scheduled for payout on 26 June 2025.
Capital Management and Balance Sheet Strength
- Gearing increased slightly from 39.6% as at 31 December 2024 to 40.7% as at 31 March 2025, due to drawdown of loans for working capital.
- Cost of debt improved by 30 basis points to 4.7% over the quarter, with 56.7% of debt either fixed or hedged.
- Rental outstanding from Metropolis Propertindo Utama (MPU) rose to SGD5.8 million as at 31 March 2025, up from SGD4.6 million at the end of 2024. Management remains actively engaged with the tenant to resolve this issue.
- A marketing agent has been appointed to facilitate a price discovery process as part of the ongoing strategic review of the Indonesian portfolio.
Investment Summary: Key Metrics and Financials
| SGD million |
FY24 |
FY25E |
FY26E |
| Rental income |
102.2 |
101.2 |
105.8 |
| Net property income |
98.5 |
97.6 |
102.1 |
| Total return for the year |
36.8 |
48.2 |
51.3 |
| Distribution to unitholders |
50.1 |
48.7 |
50.8 |
| DPU (S cents) |
2.36 |
2.32 |
2.40 |
| Key Ratios |
FY24 |
FY25E |
FY26E |
| Distribution yield (%) |
9.3 |
9.1 |
9.4 |
| P/NAV (x) |
0.89 |
0.91 |
0.94 |
| NPI margin (%) |
96.3 |
96.4 |
96.5 |
| Aggregate leverage (%) |
39.6 |
39.6 |
39.9 |
ESG Initiatives: Environmental, Social, and Governance Commitments
- First REIT reported improved Scope 3 emissions in Singapore and Indonesia from FY23 to FY24, despite lacking direct operational control over leased properties.
- In FY24, more than SGD1.3 million was allocated to CAPEX for environmental upgrades, such as energy-efficient air conditioners, LED emergency lighting, and lift modernization.
- The REIT maintains a diverse, equitable, and inclusive workplace, with women representing 70% of its workforce as of December 2024. There were no discrimination incidents in FY24, and employees averaged 25 hours of training, meeting set targets.
- Strict compliance policies are in place covering conflict of interest, whistle blowing, anti-money laundering, anti-bribery/corruption, and personal data protection.
Company Financials: Detailed Performance Snapshot
| Income Statement (SGD millions) |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
FY2024 |
| Revenue |
79.6 |
102.3 |
111.3 |
108.6 |
102.2 |
| Gross Profit |
67.6 |
90.8 |
97.8 |
94.9 |
88.4 |
| Operating Income |
63.4 |
89.8 |
95.7 |
93.9 |
87.2 |
| Pretax Income |
-358.2 |
75.8 |
52.0 |
78.2 |
50.6 |
| Net Income/Net Profit |
-352.4 |
63.1 |
33.6 |
63.3 |
36.8 |
| Basic Earnings per Share |
-0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
| Return on Common Equity (%) |
-53.93 |
10.74 |
4.71 |
9.31 |
5.43 |
| Net Income Margin (%) |
-446.91 |
58.53 |
27.87 |
56.82 |
34.33 |
| EBIT to Interest Expense |
3.47 |
5.20 |
4.94 |
4.12 |
3.81 |
| Long-Term Debt/Total Assets (%) |
29.22 |
23.82 |
37.51 |
37.81 |
39.00 |
Portfolio Profile: Geographic and Asset Diversification
- As of 31 December 2024, First REIT’s portfolio comprises 32 properties across Asia, with a total asset value of SGD1.12 billion.
- Portfolio breakdown: 3 nursing homes in Singapore, 14 nursing homes in Japan, and 15 Indonesian properties (including hospitals, integrated hospital-malls, an integrated hospital-hotel, and a hotel-country club).
- Rental income by geography (FY24): Indonesia 82.4%, Japan 13.7%, Singapore 3.9%.
- Major tenants include PT Siloam International Hospitals Tbk (Indonesia) and established third-party operators (Singapore/Japan).
- Sponsors OUE Limited and OUE Lippo Healthcare Limited jointly hold a 45.2% stake as of end-2024.
| Year |
Net Property Income (SGD m) |
Gearing Ratio (%) |
DPU (S cents) |
| FY2018 |
114.4 |
35.0 |
8.60 |
| FY2019 |
112.9 |
34.5 |
8.60 |
| FY2020 |
77.5 |
49.0 |
4.15 |
| FY2021 |
100.2 |
33.6 |
2.61 |
| FY2022 |
108.6 |
38.5 |
2.64 |
| FY2023 |
105.3 |
38.7 |
2.48 |
| FY2024 |
98.5 |
39.6 |
2.36 |
Valuation and Peer Comparison
| Company |
P/E (FY25E) |
P/E (FY26E) |
P/B (FY25E) |
P/B (FY26E) |
EV/EBITDA (FY25E) |
EV/EBITDA (FY26E) |
Dividend Yield (%) (FY25E) |
Dividend Yield (%) (FY26E) |
ROE (%) (FY25E) |
ROE (%) (FY26E) |
| First Real Estate Investment Trust (FRET.SI) |
9.8 |
9.8 |
N.A |
N.A |
N.A |
N.A |
9.4 |
9.4 |
N.A |
N.A |
| Parkway Life Real Estate Investment Trust (PWLR.SI) |
24.9 |
23.0 |
1.6 |
1.4 |
26.9 |
26.0 |
3.6 |
4.3 |
8.2 |
8.1 |
| Healthcare & Medical Investment Corp (3455.T) |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
Potential Catalysts and Risks
- Potential Catalysts:
- DPU-accretive acquisitions
- Capital recycling through divestment of non-core assets
- Stronger-than-expected financial performance at Siloam, driving faster rental escalation
- Successful negotiation for more favorable lease terms at renewal
- Risks:
- Execution challenges in implementing the 2.0 Growth Strategy and rejuvenating the portfolio
- Significant depreciation of IDR or JPY against SGD
- Tenant default risk
Conclusion: Outlook and Investment Recommendation
First REIT remains a robust player in the healthcare REIT sector, benefiting from long-term demographic trends and stable contractual cash flows. Management’s focus on operational excellence, risk diversification, and sustainability initiatives further strengthens its investment case. The ongoing strategic review and potential portfolio expansion in Indonesia represent key watch points for investors seeking growth catalysts.
OCBC Investment Research maintains a “BUY” rating with a fair value estimate of SGD0.27, reflecting confidence in First REIT’s resilient income profile and attractive risk-reward proposition within the Asia healthcare REIT landscape.
