OCBC downgrades First REIT to sell

Analyst Joseph Ng at OCBC Bank has downgraded First REIT, Singapore’s first listed healthcare real estate investment trust, to a “sell” based on concerns about its main revenue contributor and sponsor, Indonesian conglomerate Lippo Karawaci.

“S&P Global has recently downgraded LK from B- to CCC+ with negative outlook, and has mentioned that they could lower the rating by one notch or more if LK does not raise Rp1 trillion (US$71 million) in three months, alongside other conditions,” noted Ng.

He added that the sale of Lippo’s remaining 10.6% stake in First REIT was a possibility.

It was Fitch’s downgrade of Lippo in November last year from B to CCC+ that saw First REIT’s shares drop 16%.

Listed on the Main Board of the SGX since 2006, First REIT has a portfolio of 20 high quality healthcare-related properties with stable cash flows and long lease terms across Indonesia, Singapore, and South Korea. It has a market cap of S$853.5 million ($US$629 million).

Although they have recovered from their November lows, First REIT shares are still showing a one-year decline of 14% according to Bloomberg. On the downgrade, Its shares dropped 4.4% to S$1.09.