FREIT maintains healthy balance sheet-- thanks to hospitals

First REIT's gross revenue for 1Q11 increased 95.6% YoY to S$14.6 mln due to contributions from its new hospitals.

Total distributable income, meanwhile, increased 88.5% YoY to S$9.9 mln.

In a statement, OCBC cited the recognition of deferred rental income from the Adam Road Hospital and earnings from Mochtar Riady Comprehensive Cancer Centre (MRCCC) and Siloam Hospitals Lippo Cikarang as drivers behind FREIT's "improved performance."

FREIT's divestment of Adam Road was completed on March 25, 2011. MRCCC, meanwhile, is the first private specialised cancer centre in Indonesia with state-of-the-art equipment.

OCBC expects the firm to benefit from MRCCC's reputation as Indonesia's latest high-tech health hub, saying the hospital will experience a ramp-up in earnings in the future.

"This would benefit FREIT moving forward, given that its master lease entitles it to enjoy a variable upside potential, the magnitude of which depends on a function of turnover growth," the bank said.

OCBC said the growing demand for quality healthcare services in Indonesia presents "good opportunities" for FREIT's growth. The firm recently announced its desire to raise its profile by seeking to achieve an asset base of S$1bln within the next two to three years.

Despite currently having a healthy balance sheet, the bank sees FREIT's future acquisitions to be funded by debt.

The bank noted, however, that FREIT still has sufficient debt headroom of S$218.0m to undertake new acquisitions.