SINGAPORE (Aug 25): OCBC is maintaining its “hold” rating on First REIT (FREIT) with a fair value estimate of $1.38 as sponsor seeks to be expand network of Siloam Hospitals Group further.
PT Siloam International Hospitals TBK, operated by PT Lippo Karawaci Tbk, FREIT’s sponsor, aims to grow from its current 31 hospitals to 50 hospitals in 25 cities by 2019.
This would allow it to house over 10,000 beds, serving over 15 million patients per annum.
Siloam also plans to do a second rights issue for expansion purposes, subject to an EGM in Sept.
“While these have no immediate impact on FREIT, the pool of Right of First Refusal (ROFR) assets for possible injection into FREIT in future will invariably expand,” says lead analyst Joseph Ng in a Friday report.
Siloam released its 1H17 operational update, which was a mixed bag of indications, says Ng.
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While outpatient visits in 1H17 increased 9% y-o-y to 1.1 million, in-patient admissions fell by 2% YoY to 85,900 y-o-y.
This was not surprising, given that emergency visits, which is an important contributor to in-patient admissions, dropped 8% y-o-y to 127,100.
“Still, we believe that healthcare spending in Indonesia has room for further growth in the long term,” says Ng, “According to the World Bank and World Health Organisation, total healthcare spending in Indonesia stands at 3.1% of GDP, while that of other Southeast Asian peers like Malaysia and Vietnam are at 4.0% and 6.0% of GDP, respectively.”
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Ng also expects positive base rental revisions for FREIT’s Indonesian assets given they are pegged to two times Singapore’s CPI -- subject to a floor of 0% and cap of 2%.
As at 1.14pm, units in FREIT are trading 0.5 cent lower at $1.345.
FREIT is trading at a FY17F distribution yield of 6.3%, P/E ratio of 23.5x and a P/B ratio of 1.3x.
