Thursday, 18 October 2018

First REIT Q3, looking into SILOAM and Lippo Karawaci

There has been few negative news revolving Lippo Karawaci(LPKR) which is the largest Master Payee for First Reit, some of the link below to the news
1. Downgrade by Moody
2. Corruption by some of LPKR Senior Employee

First REIT Financial,

Nothing much has change a few some of the key item I would like to keep in mind


This has been concern for many First Reit shareholder and it is one of the highlight in analyst report.
Receivable has increase from 29m in Q2 to 49M in Q3, an increase of 20M. The Manager shared it has received 17.5m in 15 Oct and the quarterly report is ended on 30 Sep, hence it is a late but it is late on advance rental payment (Oct to Dec).

This is basically related to LPKR cash flow issue highlighted in the news above.


First REIT has a debt of 100m that will need to be refinanced by Nov 18 and 10m to be refinance in Mar 19. It is currently in negotiation with the bank to extend. The next debt need to be refinance is $182.1m in FY2021 which 2-3 years from now.

Current Average Effective Interest Rate is around 4% and for the fixed interest rate it is hedge for 2 years (No clarity on when the hedge will end) and the debt on fixed rate proportion 59%.

As we are in the raising interest rate environment, we could expect it might be refinanced with higher interest rate.

Now, PT Lippo karawaci (LPKR) - Account for 82.4% of First REIT Income

I took a quick glance on Siloam Hospital Financial report and does not seem Siloam Hospital having issue on their cash flow. SILO current asset is higher than their total debt.

Next, I took a look at Lippo Karawaci Financial report ended Mar 18 which has 51.05% interest in SILO. Their current ratio which is the current asset/current liabilities actually quite high at 5.

Looking into one level down in LPKR financial report,

Current Asset (in the report 45,022,456)

Below I only take those that i think is liquid
  1. Cash and equivalent : 1,873,233
  2. Available for Sale Financial Asset : 6,799,644
    • This is include their holding in LMIR and First REIT (which they have disposed half of their holding and now the holding at 10.63% of the total First Reit issued unit)
  3. Other Current Financial Assets : 2,250,580
  4. Inventories :29,835,373

Current Liabilities (in the report 8,887,980),

Some of the interesting Item out of those figure
  1. Advances from Customers: 2,428,184
  2. Sale and Leaseback Transactions : 263,712
    1. This is interesting as I guess it is related to FIRST REIT as we can find the detail in their foot note 45.b

Now, looking at their long term debt

Below are their financial ratio

Below are their debt maturity

For the cash flow, 

It is currently generating negative cash flow


As per report in many website, if LPKR has cash flow problem they might want to sell some of their asset to fund their cash flow which they did with their disposal 100% disposal on Bowsprit and 10.63% in First Reit.

With the recent corruption charges, their sales on Meikarta project might be impacted as Me as an investor, I will avoid the project that has dispute.

Looking at LPKR financial report, I will hold my First Reit for now while monitoring their financial and on the corruption charges. However DPU might be impacted by the raising interest rate.

While looking at those company, I found Mr Ketut Budi Wijaya has position on those company, interesting.

Sunday, 7 October 2018

Debt Profile of my REIT Holding - The Impact of Interest Rate starting to be felt?

It seem now I start to feel the impact from US Interest rate hike start, my home loan that is tie to the Fix deposit rate has been increasing few times this year every time US raise their interest rate.

With this, I assume it will be the same for loan to the business and it will start to impact the REIT especially those correlate to USD interest rate hence its trigger me to review the loan of my few largest REIT holding

First REIT

  1. Proportion of debt based on fix rate has been reducing from 92.3% to 60.7%
  2. 100M is due to be refinanced by 2018
  3. No information on the average interest rate in their financial report.

First REIT has been having a few negatives news that make me worry as well
  1. The Sponsor financial instabilities and with Rupiah depreciating against USD, it might add more issue to the sponsor. 
  2. OUE has taken over the REIT Manager which I don't really like as based on the other 2 REIT under OUE, it has not been performing well and more like dumping ground.

With the above,
Interest Rate hike might hurt First REIT distribution as only 60% with fixed interest rate.

If REIT manager under OUE make the 1st non-dpu friendly acquisition from OUE, I guess it is the time to say bye to First REIT before it destroyed further.

Now i am pondering if I should reduce further my holding in First Reit as it is currently my largest holding.

Frasers Logistics & Industrial Trust

  1. Debt mainly in AUD and Euro, natural hedge.
  2. Proportion of debt based on fix rate has increase in Q318 to 81% from 79% in Q217
  3. Average cost of borrowing at 2.5%

With the debt mainly in AUD and EURO which yet to start their rate hike even with US raising the interest rate, I guess it should be safe for now

CapitaLand Retail China Trust

  1. 80% of the debt is currently hedge into fixed rates hence 20% in variables
  2. Average cost has been inching up from 2.51% in 1Q18 in March to 2.6%  2Q18 in Jun
  3. Debt is in SGD

With the debt in SGD, the interest rate hike will definitely impact CRCT once the hedge expired and need to re-hedge

Maple Greater China Trust

  1. 90% of debt is hedge into fixed rate increase from 78% in March 18.
  2. Natural debt in HKD, RMB and Yen
  3. Average interest rate 2.44%

Hong Kong has been following US on the interest rate hike to 2.5%
Japan yet to start to raise their interest rate.

I guess, the average might be going up due to interest rate hike in Hong Kong as it is still the majority of loan proportion.


Seem most of my main holding in REIT will be impacted except FLT for now.

Turbulence coming?

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