Added First Reit to SRS

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First Reit (AW9U.SI) price dropped 5% in past month. The highest price traded this year was 1.42. Now its 1.24.

Trading halted yesterday and resume today. The news released yesterday is that OUE and OUE Lippo Healthcare, plans to acquire stakes in First REIT and its its manager, Bowsprit, at the price of $1.228. In its press release, “We look forward to our continued relationship with Lippo Karawaci even as we enter a new era of expansion under the ownership of OUE and OUELH”.

For Stephen Riady, the head of both OUE and Lippo Group, its left pocket to right pocket. He reduces the debt of Lippo Karawachi, while OUE gets good cash flow generating assets, all in one corporate action.

I have owned First Reit for many years. There are many reasons why I like it. Here are main ones:

  • Indonesia properties rental pegged to SGD.
  • 9 years average lease expiry
  • increasing NAV
  • increasing DPU

Risks :

  • First Reit may acquire about 1 healthcare related property a year. Their gearing (Debt/Asset) now is a healthy 34%. Sooner or later, they will issue rights or similar corporate actions when their gearing nears 40%. When a company issues rights, typically the share price will drop.
  • Indonesia borrow in USD, while their Rupiah weakens. These market headwinds may affect the First Reit share price.
  • Bad news about Lippo Karawachi debts may surface here and then. This may affect the price of First Reit.

Today I added to my First Reit position in my SRS account at 1.24. The yield at this price is 6.93%.

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