Is First REIT A Good Buy In 2025? [Fundamental Analysis]

Daniel Lee
May 9
3 min read

In this article, we'll conduct a fundamental analysis and review of First REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To April 25

Business Description

First REIT is a Healthcare REIT that was listed in 2006 and owns healthcare properties with the majority of its revenue being derived in Indonesia.

What I Like About :

Clear strategic direction: To move into the developed markets with a target allocation of 50% of AUM by 2027 and liquidate non-core or mature assets (Hospitality & Retail) for capital recycling to focus on healthcare properties.
The overall portfolio’s WALE is high and the master lease agreement often comes with a built-in rent increment (at least 4.5% in Indonesia)

What I Do Not Like About

High tenancy concentration risk of which the main tenant had shown signs of weakness (nearly defaulted) in 2020. As such, investors will have to pay special attention to the health of the tenant to avoid a repeat.
First REIT borrowing comprises onshore and offshore loans denominated in SGD and JPY which may expose the portfolio to higher FX volatility impacts and currency risk.
High foreign exchange rate exposure to the Indonesia Rupee which, historically, has been performing very poorly against the Singapore Dollar.

Updates From Recent Performance (FY 2024)

General Comments:

On a local currency basis, operational performances improved across the properties from the built-in increment and performance-based rental. However, on the SGD basis, gross revenue decreased by 5.86% due to further strengthening of SGD.
Rental outstanding from PT MPU has yet to be settled, though the security deposits guaranteed by the Joint Tenant should be able to cover around 92% of the outstanding rent.
The financial health of First REIT remained relatively unchanged, apart from a slight increase in the gearing ratio due to the lowered property valuation as a result of FX depreciation. Generally, there is no cause for concern about their capital management.

Positive Headwinds:

Low refinancing requirement in FY2025. This should keep the cost of borrowing stable before declining in FY2026 as the management refinances a chunk of their ongoing debts.

Negative Headwinds:

The risk of further currency weakening – especially for the Indonesia Rupee – against SGD may be high in FY2025 at the back of heightened global uncertainty and the impacts of the ongoing global trade war.

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