Financials

Full Year Unaudited Financial Statements & Distribution Announcement 2020

Financials Archive

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2020 FULL YEAR UNAUDITED FINANCIAL STATEMENTS & FOURTH QUARTER DISTRIBUTION ANNOUNCEMENT

Summary of First REIT's Results

Note:

  1. Rental and other income for 2H 2020 decreased by 28.9% to S$41.0 million, and net property and other income for 2H 2020 decreased by 29.4% to S$39.9 million as compared to 2H 2019 mainly due to the additional twomonth rental relief for September and October 2020 extended to Indonesia tenants.
  2. The distribution amount to Unitholders included the 3Q 2020 distribution of S$8.2 million which was paid on 23 December 2020. The 4Q 2020 distribution amount to Unitholders is S$6.8 million.
  3. Distribution per unit (“DPU”) included 3Q 2020 DPU of 1.01 cents which paid on 23 December 2020. The 4Q 2020 DPU is 0.84 cents.

Statement of Total Return

Note:

NM - Not meaningful

  1. Rental and other income for 2H 2020 decreased by 28.9% to S$41.0 million compared to 2H 2019 mainly due to additional two-month rental relief for September and October 2020 extended to Indonesia tenants to alleviate the economic distress caused by the COVID-19 pandemic.
  2. Property operating expenses for 2H 2020 decreased by 4.3% to S$1.1 million compared to 2H 2019 mainly due to lower property expenses for Indonesia properties.
  3. Manager’s management fees for 2H 2020 decreased by 18.3% to S$4.7 million compared to 2H 2019 mainly due to lower net property income and total assets.
  4. Trustee fees for 2H 2020 decreased by 6.5% to S$0.2 million compared to 2H 2019 mainly due to lower total assets.

Statements of Financial Position

Note:

  1. Investment properties decreased from S$1,340.8 million to S$939.7 million mainly due to net fair value losses on revaluation of investment properties, which the valuation of the certain Indonesia properties have taken into consideration the terms arising form (a) the Memorandum of Understanding entered into between Perpetual (Asia) Limited (as trustee of First REIT) and PT. Lippo Karawaci Tbk dated 28 November 2020 as announced in First REIT’s announcement on 29 November 2020 titled “Restructuring of Master Leases” (the “Restructuring Announcement”); (b) the Memorandum of Understanding entered into between the Trustee and PT. Metropolis Propertindo Utama dated 28 November 2020 as announced in the Restructuring Announcement; and (c) existing occupation arrangements of the properties not affected by (a) or (b).
  2. Deferred tax liabilities decreased from S$39.7 million to S$20.0 million mainly due to write back of provision for deferred taxation on change in fair value on investment properties.
  3. Other financial liabilities, non-current decreased from S$486.4 million to S$293.7 million mainly due to reclassification of the S$195.3 million bank loans, net of unamortised cost from non-current to current as the bank loans will be maturing in March 2021. These current bank loans will be refinanced by a new facility agreement entered by the Trust and Oversea-Chinese Banking Corporation Limited and CIMB Bank Berhad, Singapore Branch on 24 December 2020, in respect of a term loan facility of S$178.5 million and a revolving credit facility of S$42.5 million, with an accordion option for a S$39.0 million.

Review of the performance

2H 2020 vs 2H 2019

Rental and other income for 2H 2020 decreased by 28.9% to S$41.0 million compared to 2H 2019 mainly due to additional two-month rental relief for September and October 2020 extended to Indonesia tenants to alleviate the economic distress caused by the COVID-19 pandemic.

Property operating expenses for 2H 2020 decreased by 4.3% to S$1.1 million compared to 2H 2019 mainly due to lower property expenses for Indonesia properties.

Manager’s management fees for 2H 2020 decreased by 18.3% to S$4.7 million compared to 2H 2019 mainly due to lower net property income and total assets.

Trustee fees for 2H 2020 decreased by 6.5% to S$0.2 million compared to 2H 2019 mainly due to lower total assets.

Finance costs for 2H 2020 decreased to S$7.9 million compared to 2H 2019 mainly due to lower interest rates.

Other expenses for 2H 2020 increased to S$4.2 million compared to 2H 2019 mainly due to project expenses incurred.

Net fair value losses on investment properties increased to S$401.4 million compared to 2H 2019 mainly due to the valuation of certain Indonesia properties have taken into consideration the terms arising from (a) the Memorandum of Understanding entered into between Perpetual (Asia) Limited (as trustee of First REIT) and PT. Lippo Karawaci Tbk dated 28 November 2020 as announced in First REIT’s announcement on 29 November 2020 titled “Restructuring of Master Leases” (the “Restructuring Announcement”); (b) the Memorandum of Understanding entered into between the Trustee and PT. Metropolis Propertindo Utama dated 28 November 2020 as announced in the Restructuring Announcement; and (c) existing occupation arrangements of the properties not affected by (a) or (b) .

Net change in fair value of derivative financial instruments for 2H 2020 relates to the revaluation gains on the interest rate swap contracts.

Income tax benefit for 2H 2020 of S$12.3 million compared to income tax expense for 2H 2019 mainly due to write back of provision for deferred taxation on net fair value losses on investment properties.

Total return after tax for 2H 2020 decreased as compared to 2H 2019 mainly due to fair value losses on revaluation of investment properties. Excluding changes in fair value on revaluation of investment properties net of deferred tax, net changes in fair value of derivative financial instruments and unrealised exchange gains from USD loan, total return after tax for 2H 2020 will decrease by 49.8% to S$16.0 million compared to 2H 2019 of S$31.8 million mainly due to additional two-month COVID-19 rental relief for September and October 2020 provided to Indonesia tenants and higher project expenses incurred.

FY 2020 vs FY 2019

Rental and other income for FY 2020 decreased by 30.9% to S$79.6 million compared to FY 2019 mainly due to a two-month COVID-19 rental relief for May and June 2020 provided to all tenants and an additional two-month rental relief for September and October 2020 extended to Indonesia tenants to alleviate the economic distress caused by the COVID-19 pandemic.

Property operating expenses for FY 2020 decreased by 10.4% to S$2.2 million compared to FY 2019 mainly due to the lower property expenses incurred for Indonesia properties and property tax rebates received for Singapore property.

Interest income for FY 2020 decreased to S$1.4 million compared to FY 2019 mainly due to termination of development of new Siloam Hospitals Surabaya on 29 June 2020.

Manager’s management fees for FY 2020 decreased by 17.5% to S$9.4 million compared to FY 2019 mainly due to lower net property income and total assets.

Trustee fees for FY 2020 decreased by 3.3% to S$0.4 million compared to FY 2019 mainly due to lower total assets.

Finance costs for FY 2020 decreased to S$17.8 million compared to FY 2019 mainly due to lower interest rates.

Other expenses for FY 2020 increased to S$5.7 million compared to FY 2019 mainly due to project expenses incurred.

Net fair value losses on investment properties increased to S$401.4 million compared to 2H 2019 mainly due to the valuation of certain Indonesia properties have taken into consideration the terms arising from (a) the Memorandum of Understanding entered into between Perpetual (Asia) Limited (as trustee of First REIT) and PT. Lippo Karawaci Tbk dated 28 November 2020 as announced in First REIT’s announcement on 29 November 2020 titled “Restructuring of Master Leases” (the “Restructuring Announcement”); (b) the Memorandum of Understanding entered into between the Trustee and PT. Metropolis Propertindo Utama dated 28 November 2020 as announced in the Restructuring Announcement; and (c) existing occupation arrangements of the properties not affected by (a) or (b) .

Net change in fair value of derivative financial instruments relates to the revaluation losses of interest rate swap contracts.

Income tax benefit for FY 2020 of S$5.8 million as compared to income tax expense for FY 2019 mainly due to write back of provision for deferred taxation on net fair value losses on investment properties.

Total return after tax for FY 2020 decreased as compared to FY 2019 mainly due to fair value losses on revaluation of investment properties. Excluding changes in fair value on revaluation of investment properties net of deferred tax, net changes in fair value of derivative financial instruments and unrealised exchange gains from USD loan, total return after tax for FY 2020 will decrease by 48.0% to S$32.8 million compared to FY 2019 of S$63.1 million mainly due to a two-month COVID-19 rental relief for May and June 2020 provided to all tenants and an additional two-month rental relief for September and October 2020 extended to Indonesia tenants as well as higher project expenses incurred.

Commentary on the competitive conditions of the industry

“The outlook of the healthcare sector is resilient both in Indonesia and globally. Additionally, we remain confident in First REIT’s future, given that we have a strong and reputable hospital operator, PT Siloam International Hospitals Tbk, who is the most progressive and innovative healthcare provider in Indonesia. We believe it will continue to outperform its peers in Indonesia, thereby generating long-term growth for our hospitals. With the proposed MLAs restructuring, First REIT will have greater certainty on its cash flows and valuations. Through the recapitalisation exercise, our gearing will be reduced and we will have a debt headroom in excess of S$300 million. This ensures that First REIT is well-placed to seize yield-accretive acquisition opportunities outside of Indonesia and drive diversification efforts either through our sponsor, OUE Lippo Healthcare Limited’s Pan-Asian healthcare network which spans countries like Japan, China and Myanmar, or from third parties,” concluded Mr Tan.

Indonesia’s gross domestic product (“GDP”) contracted 3.49% y-o-y in the third quarter of 2020, mainly due to a 4.0% decrease in household consumption and a 6.5% decrease in investment driven by the COVID-19 pandemic. On a quarter-on-quarter basis, GDP rose 5.05%, after a 4.19% contraction in the second quarter1. At the final meeting of the year, Bank Indonesia kept its key interest rate unchanged at 3.75% after five rounds of interest rate reduction to support Indonesia’s pandemic-hit economy during the year2.

Looking ahead, according to a report by Organization for Economic Co-operation and Development (“OECD”), Indonesia’s GDP is poised to grow at 7.9% in 2021, making it the second-fastest growing economy in the world after China3. The Indonesian parliament approved a state budget of IDR2.75 quadrillion for 2021, with substantial investments directed towards strengthening the healthcare system.

While Indonesia has been significantly affected by the pandemic with over 758,000 virus cases as of 2 January 2021, it has taken steps to enforce social distancing restrictions in the worst-hit zones, secured close to 300 million doses of COVID-19 vaccines from various pharmaceutical companies and started distribution of its first delivery of vaccine to all its 34 provinces on 2 January 20214,5.

The COVID-19 pandemic has impacted businesses globally, First REIT has and will continue to work with its tenants to ensure strict precautionary measures that prioritise the health and safety of all its patients, medical staff and visitors across all its properties.

  1. 6 November 2020, Business Times – Indonesia sinks into first recession in over 20 years
  2. 18 December 2020, Business Times – Bank Indonesia keeps key rates unchanged at final meeting of 2020
  3. 15 December 2020, Business Times – Indonesia poised for strong economic rebound in 2021
  4. 30 December 2020, Straits Times – Indonesia set to secure 100m doses of vaccines from two drugmakers
  5. 3 January 2021, Business Times – Indonesia starts nationwide Sinovac vaccine distribution: Kompas

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