OCBC Investment Research
30 July 2025

First REIT Faces Currency Volatility and Strategic Uncertainty: In-Depth 2025 Analysis and Outlook

Overview: Currency Headwinds and Strategic Review Dominate 1H25

First Real Estate Investment Trust (First REIT), a leading Singapore-listed healthcare REIT, continues to navigate a turbulent environment marked by currency volatility and evolving strategic priorities. As of the first half of 2025, the trust has reported a 5.8% year-on-year decline in distribution per unit (DPU) to 1.13 Singapore cents—falling short of expectations amid persistent Indonesian Rupiah (IDR) fluctuations. While structural megatrends such as Asia’s aging population and rising healthcare demand remain supportive, foreign exchange challenges and strategic uncertainties have prompted a cautious market stance.

Key Report Highlights

• 1H25 DPU declined by 5.8% YoY to 1.13 Singapore cents, missing internal forecasts due to IDR volatility.
• Fair value estimate maintained at SGD 0.27, with a downgraded “HOLD” rating citing valuation constraints and downside DPU risks.
• Strategic review ongoing, including assessment of a non-binding letter of intent from PT Siloam International Hospitals Tbk for potential acquisition of Indonesian hospital assets.
• Strong long-term fundamentals: portfolio of 32 healthcare assets across Singapore, Japan, and Indonesia, with a WALE of 10.1 years as of 30 June 2025.

Investment Thesis: Resilient Structure Meets Market Headwinds

First REIT’s portfolio spans 32 properties—including nursing homes and hospitals—across three countries, providing robust cash flow visibility with a weighted average lease expiry (WALE) of 10.1 years. Its master leases feature built-in rental escalation clauses, presenting opportunities for organic rental growth and upside sharing mechanisms with tenants. The trust’s “2.0 Growth Strategy” aims to further diversify across tenants and geographies, enhancing risk management.
Strategically, First REIT received a preliminary non-binding letter of intent from Siloam at the start of 2025, potentially reshaping its Indonesian asset base. The trust is actively reviewing this proposal alongside broader strategic options.

Detailed Financial Performance: 1H25 Results and Forecasts

• Rental income and net property income fell 2.9% and 2.7% YoY, respectively, largely due to FX headwinds.
• In local currency terms, Indonesian rental income rose 5.5% YoY (to IDR 378.2b), while Japanese assets held steady at JPY 754.5m. Singapore assets delivered 2% YoY rental growth (SGD 2.23m).
• The distributable amount slid 4.8% YoY to SGD 23.8m, with the lower DPU reflecting a larger unit base and FX drag.

Key Financial Forecasts and Ratios

• Forecasts for FY25 and FY26 DPU have been trimmed by 3.8% and 3.2% respectively, reflecting ongoing FX volatility and a revised cost of equity (9.9%).
• Quarterly DPU for the remainder of FY25 is expected to remain stable at 0.55 Singapore cents, but downside risks persist should currency volatility intensify.

Capital Management and Credit Metrics

• Gearing edged up to 41.2% as of 30 June 2025 (from 40.7% at end-March), attributed to lower asset values from IDR depreciation and increased working capital borrowings.
• All-in cost of debt increased by 10bps to 4.8%, with 56.2% of debt fixed or hedged. No refinancing needs until May 2026.
• Outstanding rentals from Metropolis Propertindo Utama (MPU) rose to SGD 7m, with management actively engaging MPU (which contributed 5.7% of 1H25 rental income).

Valuation and Peer Comparison

• Fair value estimate for First REIT remains at SGD 0.27, with a HOLD rating due to tight valuation and strategic uncertainties.
• Peer comparison for Parkway Life REIT shows higher price/earnings and lower yields, highlighting sector-wide valuation pressures.

ESG Initiatives and Social Commitments

• Environmental: Reported improvements in Scope 3 emissions from Singapore and Indonesia operations (FY23-FY24). Over SGD 1.3 million in CAPEX allocated for energy efficiency, including upgrades to air conditioning systems, LED lighting, and lift modernization.
• Social: Commitment to diversity and inclusion, with women comprising 70% of the workforce as of December 2024. Employees averaged 25 hours of training, and no discrimination cases reported.
• Governance: Robust policies for conflict of interest, whistle-blowing, anti-money laundering, anti-bribery, and data protection have been implemented, with a strong emphasis on healthcare data security.

Potential Catalysts and Investment Risks

• Catalysts: DPU-accretive acquisitions, capital recycling from the sale of non-core assets, outperformance at Siloam (driving faster rental escalation), and successful lease renegotiations.
• Risks: Execution challenges in the 2.0 Growth Strategy, significant depreciation of IDR or JPY, and tenant defaults.

Company Overview and Asset Profile

• First REIT was Singapore’s first healthcare REIT, listed in 2006, with a vision to be Asia’s premier healthcare trust.
• As of 31 December 2024: 32 properties, total asset value SGD 1.12 billion.
• Geographic mix (FY24 rental breakdown): Indonesia 82.4%, Japan 13.7%, Singapore 3.9%.
• Indonesia assets operated by Siloam; Singapore and Japan by established third-party operators.
• Sponsors: OUE Limited and OUE Lippo Healthcare Limited, holding a combined 45.2% stake.

Comprehensive Financials: 2020-2024

Conclusion: Strategically Positioned but Cautiously Rated

First REIT stands at a crossroads, balancing long-term demographic and healthcare demand with near-term FX volatility and strategic uncertainties. While its asset base and lease structure provide resilience, investors should closely monitor ongoing strategic reviews and currency trends. With a stable portfolio, robust ESG commitments, and disciplined capital management, First REIT remains a significant player in the Asian healthcare REIT sector—albeit with near-term headwinds that justify a “HOLD” stance.