First REIT

As I reflected upon my journey in investing, I realized I am more inclined towards income investing. With a constant stream of income coming in, it gives me a better sensing of how I am performing and the distance I am from my goal. Hence, I decided to monitor my yearly dividend which is tracked under portfolio performance, leaving capital gains out of the picture. I sold off Frasers Centrepoint Trust (J69U) for a decent capital gain yield of about 10% within a short span of few months, including dividend, I made about 13%. However, I regretted it moments later because Frasers Centrepoint Trust was a REIT that I love and monitored for very long. Although it was a good mistake, it taught me to add in my reasons for buying or selling any counter. Anytime I am unsure, I will be able to check back and understand the initial reason why I bought or sold that counter.

1) Background

I have been eyeing First REIT for the longest time but didn’t read up on it due to my limited capital. Since I divested Frasers Centrepoint Trust, I decided to read up on First REIT. First Reit is Singapore’s first healthcare REIT, focused on investing in healthcare related real estate assets throughout Asia. First REIT portfolio comprise of 19 properties located in Indonesia, Singapore and South Korea.

Data extracted from First REIT Website.

2) Moat

There are potential growth in the healthcare industry due to the rising middle class, better healthcare facilities and longer life span. This industry will not be affected by the advancement of technology, in fact technology will help to prolong the life span of humans which translate to a bigger pool of customers. As you can see from the data extracted from World Bank, the average lifespan for humans in Singapore, Korea and Indonesia have increased over the years. In addition, more people are able to afford healthcare with the increase in spending power.

Data extracted from World bank.

3) Fundamentals

Taking a look at First REIT financial data, First REIT have constantly increase its Net Property Income and its Distribution Per Unit. Portfolio occupancy is maintained at 100% with the average lease expiry of about 10 years.

4) Potential Pitfall

Almost 80% of First REIT portfolio is located in Indonesia. With Indonesia as an emerging country, there are huge potential in the market and First REIT is in a good position to take advantage of it. However, First REIT might be over reliant on the market of Indonesia. In addition, majority of First REIT properties in Indonesia is leased to Siloam which is a subsidiary of PT Lippo Karawaci Tbk. It may be good with PT Lippo Karawaci Tbk looking out for both First REIT and Siloam when structuring deals or bailing them out when the need arise. However, if PT Lippo Karawaci Tbk will to go underwater, things might not look so well.

5) Conclusion

With the consistent increasing Net Property Income and Distribution Per Unit, an acceptable level of debt and the unlikely hood of PT Lippo Karawaci Tbk going underwater. I have decide to enter a small position of my portfolio at the current price of $1.35.