Firstreitrating by Janice Ding

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INITIATING COVERAGE
18 January 2010

RECOM PRICE/TARGET PRICE MKT CAPITALISATION BOARD SECTOR

BUY S$0.855/S$1.08 S$235.5m Mainboard REITs

First REIT
Anchored by Indonesian domestic demand

FIRT SP

Janice Ding, (65) 6210-8609 – janice.ding@cimb.com

Initiate with BUY and DDM-based target price of S$1.08. First REIT is a healthcare real estate investment trust with eight healthcare-related assets in Indonesia and Singapore. Its sponsor is PT Lippo Karawaci Tbk, Indonesia's largest broad-based property company listed on the Jakarta and Surabaya stock exchanges with a market capitalisation of Rp.13.8tr. Our DDM-derived target price of S$1.08 represents a prospective total return 35% from a forward yield of 8.7% and potential price upside of 26.3%. We like First REIT for its income resilience anchored by reputable tenants and positive industry prospects. At 0.9x P/BV, First REIT still looks attractive despite its recent price rally. Siloam Hospitals is the leading private hospital group in Indonesia. Siloam Hospitals, operator of First REIT’s Indonesian hospitals, is a subsidiary of the sponsor-cum-master lessee, Lippo Karawaci. Established through a joint venture between Lippo Group and Parkway Holdings, Siloam Hospitals has built a premium brand as the leading private hospital group with world-class facilities in Indonesia. Severe shortage of quality healthcare in Indonesia. Indonesia has one of the largest populations in the world. Yet, its total expenditure on healthcare is the lowest in South-East Asia. Huge domestic demand for quality healthcare augurs well for First REIT’s assets. Forex risks for Indonesian assets averted. The Indonesian assets would be paid in S$ at a pre-determined rate of S$1.00 to Rp5,623.50 for 15 years. This effectively removes all risks of any rupiah devaluation against the S$. Financial summary

(S$m, FYE Dec) Revenue (S$ m) Net property income (S$ m) Net property income margins (%) Pretax profit (S$ m) Net profit (S$ m) Core net profit (S$ m) Distributable profit (S$ m) EPS (S cts) Gross DPU (S cts) Dividend yield (%) P/BV (x) ROE (%) Asset leverage (%) EV/EBITDA (x) % change in DPU estimates CIMB-GK/Consensus (x) Source: Company, CIMB-GK estimates

2007 28.3 28.1 99.2 114.1 82.4 18.5 19.3 30.3 7.1 8.3% 1.0 8.2% 14.9% 11.4

2008 30.2 30.0 99.3 23.8 23.0 19.7 20.8 8.4 7.6 8.9% 0.9 2.3% 15.0% 10.8

2009F 30.2 30.0 99.3 24.5 19.3 19.3 20.4 7.1 7.4 8.7% 0.9 1.9% 15.0% 10.7 N.A

2010F 31.1 30.8 99.3 24.6 19.3 19.3 20.4 7.0 7.4 8.7% 0.9 1.9% 18.4% 10.3 N.A

2011F 33.4 33.1 99.3 26.0 20.5 20.5 21.8 7.4 7.9 9.2% 1.0 2.0% 20.5% 9.7 N.A

Market capitalisation & share price info
Market cap 12-mth price range 3-mth avg daily volume # of shares (m) Est. free float (%) Wrts/ICULS o/s (m) Conv. price (S$) Source: Company, CIMB-GK Research, Bloomberg

S$235.5m S$0.41/S$0.88 S$0.20m 275.5 71 None None

Share price perf. (%) Relative Absolute Major shareholders Lippo Karawaci Penta Investment Golden Rainbow International

1M 4.1 8.2

3M 12.3 20.4

12M 19.3 103.6 % held 20.0 12.6 9.1

SINGAPORE

CIMB Research Report

Background
Listed on the Singapore Exchange in Dec 06, First REIT is the first Singapore-based REIT to invest in income-producing real estate and/or real-estate related assets in Asia that are primarily used for healthcare and/or healthcare-related purposes. These could include hospitals, nursing homes, medical offices, R&D, and warehousing or manufacturing facilities catering to the medical, biomedical, and pharmaceutical and biotech sectors. Its sponsor is PT Lippo Karawaci Tbk, Indonesia's largest broad-based property company listed on the Jakarta and Surabaya stock exchanges with a market capitalisation of Rp.13.8tr. Lippo Karawaci owns 21.2% of the REIT. The manager of First REIT, Bowsprit Capital Corporation Limited, is an indirect subsidiary of the sponsor, through an 80% stake held by LK REIT Management Ltd, an indirect whollyowned subsidiary of...
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