Financials

Second Quarter Financial Statement And Dividend Announcement 2018

Financials Archive

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2018 SECOND QUARTER UNAUDITED FINANCIAL STATEMENTS & DISTRIBUTION ANNOUNCEMENT

Summary of First REIT's Results

Note:

  1. Actual distribution paid for FY 2017

Statement of Comprehensive Income

Note:

NM - Not meaningful

The results for 2Q 2018 includes the full quarter contribution from Siloam Hospitals Buton & Lippo Plaza Buton ("Buton Property") and Siloam Hospitals Yogyakarta ("SHYG") which were both acquired in 4Q 2017.

  1. Property operating expenses for 2Q 2018 increased by 31.6% to S$425,000 compared to 2Q 2017 mainly due to higher professional expenses incurred for Indonesia properties.
  2. Interest income for 2Q 2018 increased to S$420,000 compared to 2Q 2017 mainly due to the returns from the progress payments for the development of new Siloam Hospitals Surabaya.
  3. Finance costs for 2Q 2018 increased to S$5.5 million compared to 2Q 2017 mainly due to higher loan amounts drawn down to finance the acquisition of Buton Property and SHYG in 4Q 2017 and the second progress payment for development of new Siloam Hospitals Surabaya in 3Q 2017 as well as write off of unamortised loan related costs due to refinancing of bank loans.
  4. Other expenses for 2Q 2018 was S$1.3 million as compared to other income for 2Q 2017 mainly due to the unrealised exchange loss on USD loan and realised exchange loss related to VAT refund for acquisition of Siloam Hospitals Labuan Bajo.
  5. Net change in fair value of derivative financial instruments for 2Q 2018 relates to the revaluation of interest rate swap contracts.
  6. Income tax expenses for 2Q 2018 increased to S$4.7 million compared to 2Q 2017 mainly due to higher revenue.

Statements of Financial Position

Note:

  1. Trade and other receivables increased from S$26.0 million to S$29.1 million mainly due to advance rental receivables from tenants.

Review of the performance

2Q 2018 vs 2Q 2017

The results for this quarter includes the full quarter contribution from Siloam Hospitals Buton & Lippo Plaza Buton ("Buton Property") and Siloam Hospitals Yogyakarta ("SHYG") which were both acquired in 4Q 2017 respectively.

Gross revenue for 2Q 2018 increased by 5.3% to S$28.9 million compared to 2Q 2017 mainly due to addition contribution from Buton Property and SHYG as well as existing properties.

Property operating expenses for 2Q 2018 increased by 31.6% to S$425,000 compared to 2Q 2017 mainly due to higher professional expenses incurred for Indonesia properties.

Interest income for 2Q 2018 increased to S$420,000 compared to 2Q 2017 mainly due to the returns from the progress payments for the development of new Siloam Hospitals Surabaya.

Manager's management fees for 2Q 2018 increased by 5.9% to S$2.8 million compared to 2Q 2017 mainly due to higher net property income and total assets.

Trustee fees for 2Q 2018 increased by 5.0% to S$105,000 compared to 2Q 2017 mainly due to higher total assets.

Finance costs for 2Q 2018 increased to S$5.5 million compared to 2Q 2017 mainly due to higher loan amounts drawn down to finance the acquisition of Buton Property and SHYG in 4Q 2017 and the second progress payment for development of new Siloam Hospitals Surabaya in 3Q 2017 as well as write off of unamortised loan related costs due to refinancing of bank loans.

Other expenses for 2Q 2018 was S$1.3 million as compared to other income for 2Q 2017 mainly due to the unrealised exchange loss on USD loan and realised exchange loss related to VAT refund for acquisition of Siloam Hospitals Labuan Bajo.

Net change in fair value of derivative financial instruments for 2Q 2018 relates to the revaluation of interest rate swap contracts.

Income tax expense for 2Q 2018 increased to S$4.7 million compared to 2Q 2017 mainly due to higher revenue.

1H 2018 vs 1H 2017

Gross revenue for 1H 2018 increased by 5.5% to S$57.6 million compared to 1H 2017, mainly due to addition contribution from contribution from Buton Property and SHYG as well as existing properties.

Property operating expenses for 1H 2018 increased by 17.8% to S$715,000 compared to 1H 2017, mainly due to the higher professional expenses incurred for Indonesia properties.

Interest income for 1H 2018 increased to S$837,000 compared to 1H 2017, mainly due to the returns from the progress payments for the development of new Siloam Hospitals Surabaya.

Manager's management fees for 1H 2018 increased by 6.0% to S$5.7 million compared to 1H 2017 mainly due to higher net property income and total assets.

Trustee fees for 1H 2018 increased by 6.1% to S$210,000 compared to 1H 2017 mainly due to higher total assets.

Finance costs for 1H 2018 increased to S$10.2 million compared to 1H 2017 mainly due to higher loan amounts drawn down to finance the acquisition of Buton Property and SHYG in 4Q 2017 and the second progress payment for development of new Siloam Hospitals Surabaya in 3Q 2017 as well as write off of unamortised loan related costs due to refinancing of bank loans.

Other expenses for 1H 2018 was S$1.7 million as compared to other income for 1H 2017 mainly due to the unrealised exchange loss on USD loan, realised exchange loss related to VAT refund for acquisition of Siloam Hospitals Labuan Bajo.

Net change in fair value of derivative financial instruments for 1H 2018 relates to the termination and revaluation of interest rate swap contracts.

Income tax expense for 1H 2018 increased to S$9.2 million compared to 1H 2017 mainly due to higher revenue.

Commentary on the competitive conditions of the industry

Indonesia's gross domestic product grew 5.06%1 year-on-year in the first quarter of 2018, at a slower pace compared to the previous quarter, due mainly to sluggish consumption. To reduce reliance on domestic consumption, the Indonesian government has implemented several deregulation measures to attract more investment. Last year, Indonesia recorded 8.5% more foreign direct investment in Rupiah terms than in 2016.2 On the other hand, rising interest rates in the US have weakened the Rupiah in recent weeks, causing Bank Indonesia to raise interest rates to support the Rupiah. However, this has no impact on the Trust's borrowings as its loans are originated in Singapore and denominated in Singapore dollars.

BMI Research reported that healthcare spending in Indonesia amounted to Rp403.9 trillion in 2017 and projects it to rise to Rp1,224 trillion by 2027, and that healthcare spending per capita will more than double between 2017 and 20273. Against this trend, together with the growing nationwide adoption of the national health insurance scheme, private healthcare demand will continue to rise. As such, First REIT remains well-positioned for further growth, with a strong acquisition pipeline of around 40 hospitals in Indonesia from its Sponsor, PT Lippo Karawaci Tbk.

  1. 8 May 2018, The Straits Times - Indonesia's economy grows 5.06% in Q1, slower than forecast
  2. 13 April 2018, Business Times - Indonesia to ensure stability during elections
  3. 20 April 2018, Healthcare Asia Magazine - Indonesia's healthcare spending to balloon to $47.1b by 2022

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