| MAYBANK KIM ENG |
CGS CIMB |
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Ugly quarter but mainly from one-offs at associates
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| OCBC | UOB KAYHIAN |
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First REIT: Mind the (rental) gapFirst We believe that PT Lippo Karawaci Tbk (LK) could be looking to divest off its remaining 10.6% stake in First REIT (FREIT) for liquidity reasons so as to meet one the conditions by S&P Global in order to stave off a further credit rating downgrade. LK’s loss of ownership over FREIT would have certain ramifications for the REIT, especially in terms of visibility over longer term rental income. In 2017, we believe that Siloam paid LK ~S$12.1m in rent expenses, while FREIT received ~S$91.5m of rental income from LK. Taken together, it would not be unreasonable for LK to cease the above arrangement at the earliest opportunity, potentially requiring FREIT and Siloam to find some way to bridge the gap. With the 18.2% YTD rally, we downgrade FREIT tactically from Hold to SELL on valuation grounds with an unchanged FV of S$0.97. |
First REIT: Mind the (rental) gap
We believe that PT Lippo Karawaci Tbk (LK) could be looking to divest off its remaining 10.6% stake in First REIT (FREIT) for liquidity reasons so as to meet one the conditions by S&P Global in order to stave off a further credit rating downgrade. LK’s loss of ownership over FREIT would have certain ramifications for the REIT, especially in terms of visibility over longer term rental income. In 2017, we believe that Siloam paid LK ~S$12.1m in rent expenses, while FREIT received ~S$91.5m of rental income from LK. Taken together, it would not be unreasonable for LK to cease the above arrangement at the earliest opportunity, potentially requiring FREIT and Siloam to find some way to bridge the gap. With the 18.2% YTD rally, we downgrade FREIT tactically from Hold to SELL on valuation grounds with an unchanged FV of S$0.97.
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