23 January 2014

First REIT - FY2013 RESULT SUMMARY (Updated 23 Jan 2014)

FIRST REIT released its full year report on 17 Jan 2014. The result highlight is shown as below:

Source: Company

Source: Company

The Annualized DPU cents based on 4Q2013 and S$1.04 closing price on 16 Jan 2014 was 7.52%. To me, this is a good result especially when comparing it with its peer - Parkway REIT.

In term of annualized DPU annual growth, it is about 14.3%.

Source: Company
DPU trend is quite resilient, as you could see that the quarterly DPU rose from 1.6c in 2007 to 1.97c in 2013, which translated into a CAGR of 3%, in line with group's long term target of rental increment. So, if you look at long term target, the potential return is about 10.5% (7.5% current yield + 3.0% annualized DPU growth).

Source: Company

Source: Company, powered by ShareInvestor Station
As you can see from the graph above, First REIT performed better compared to STI Index and FTSE REITs index. The 68.94% translated into about 7% CAGR in stock price.

Question now, would I like to buy First REIT at this level? I would prefer to check again if there is any better choice in the stock market. However, I would recommend you to accumulate it when financial crisis arrives.

Growth Prospects, Source: Company
As the company is holding its 100% dividend payout policy, any future growth would be funded by several ways:

  • Dividend Reinvestment Scheme - Shareholders who wish to invest in long run could opt for this scheme to enjoy no commission charges when subscribing to new shares while the company could make use of the fund to invest in new properties.
  • Debt borrowings - Such as Medium Term Notes (MTN), Bonds and Secured Term Notes. This is the better way to acquire assets during low interest rate environment. However, the management have to access the optimal debt level from time to time to avoid cash flow problems later on. The management has a long term gearing target of not exceeding 30%.  
  • Right Issues / Private Placement / Perpetual - It may dilute the EPS in short term but could produce different result in long run depending on how the company could acquire a good profit generating assets. 

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