First Real Estate Investment Trust (SGX: AW9U) has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsors are PT Lippo Karawaci Tbk and OUE Lippo Healthcare Limited.
First REIT’s stocks are currently out of favor among investors. At its current price of S$1.00 (at the time of writing), First REIT’s shares are down by 30% from its high in the last 12 months.
Yet, despite the decline in share price, there are many reasons why the REIT might be a good investment for investors. We discussed the first two reasons in an article here. As a quick recap, those reasons were:
- Strong financial track record
- Positive result for 2018
In this article, we will continue with the final reason.
No investment analysis is ever complete unless we consider the valuation of the REIT. Here, even REIT with solid track record and good prospects might turn out to be a “bad” investment if investors overpay for it.
The good news is that First REIT seems to be trading at an attractive valuation now. This is especially true given the decline in its share price for the past year. Let’s consider the following:
Source: Stock Facts on SGX.com
The table above shows First REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
What we can see from the above is that the First REIT stock price trades at a significant discount to the market average’s distribution yield. On the other hand, its price to book ratio is comparable to the market average.
Clearly, the market is not overly optimistic about the First REIT now, rendering it a low valuation as compared to its peers.
In summary, the market is rather pessimistic with First REIT for now. Yet, long term investors might find the REIT a good investment idea now due to its strong financial track record, a positive result for 2018 and low valuation.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. Motley Fool has a recommendation for First Real Estate Investment Trust.
First Real Estate Investment Trust: 3 Reasons For Singapore Investors To Like It Now
Analysis of First Real Estate Investment Trust's valuation, and why it might be a good investment.