What’s in the news and What do we think
Our target price incorporates a forecasted 2% annual rental escalation for FIRT’s Indonesian properties for 2018 and 2019. This translates to a forecasted Singapore CPI growth numbers of >1% for 2017 and 2018. We expect improving global economic prospects and MAS’ decision last week to maintain a neutral policy stance for an “extended period” to provide a support for inflation numbers.
Figure 1: Singapore CPI growth turned positive in Nov 2016 after 24 consecutive months of deflation
At 6.3%, FIRT trades at a higher yield and lower P/B than fellow healthcare REIT Parkway Life REIT.
On the back of the 6% appreciation in share price from S$1.265 since the start of 2017, FIRT’s current price is c.1% above our target price. We downgrade our call from “ACCUMULATE” to “”NEUTRAL”, maintaining our DDM-derived target price of S$1.32.
First REIT Historical Dividend Yield and Price/NAV
Peer Comparison Table