First REIT: Accumulate With a Lower Target Price of S$0.17 — Still Waiting for the Next Move November 4, 2026
Brief Overview
First REIT reported third-quarter 2026 and nine-month 2026 distribution per unit (DPU) of 0.46 and 1.44 Singapore cents, respectively, representing declines of 11.5% and 12.7% year on year. The results came in slightly below Phillip Securities Research estimates, forming 23% and 73% of the full-year 2026 forecast. The decline was driven by the depreciation of the Indonesian rupiah (down 8% year on year over nine months) and the Japanese yen (down 9.8% year on year over nine months) against the Singapore dollar, combined with the impact of its Indonesian hospital divestments. Nine-month 2026 rental income and net property income declined by 9.5% year on year. Excluding the divestments, rental income would have declined by 6% year on year.
The REIT completed the first tranche of its Indonesian hospital divestments on 24 September 2026. The potential divestment of the remaining six Indonesian hospitals to Siloam for approximately S$294.8 million under the existing put option remains under consideration.
Phillip Securities Research maintains an Accumulate recommendation with a lower target price of S$0.17, reduced from S$0.23 previously, pending capital redeployment into replacement assets. The valuation is based on 0.8 times third-quarter 2026 price-to-net asset value (P/NAV), reflecting ongoing foreign exchange risks and uncertainty over the future portfolio composition. DPU forecasts have been lowered by 6% for FY26e and 38% for FY27e to reflect the first tranche of Indonesian divestments, while incorporating S$9.7 million in special dividends split evenly between the fourth quarter of 2026 and the first quarter of 2027. Including special dividends, the FY26e dividend yield is 10.2%, declining to 6.9% in FY27e following the divestments. The strategic review remains ongoing, and management has provided no updates on potential acquisitions.
Investment Positives
Resilient Income in Local Currency Terms
Despite the headline decline in DPU, First REIT’s underlying income remained resilient when measured in local currency terms. Nine-month 2026 revenue from the Indonesian properties increased by 2.8% year on year in local currency, while Singapore properties recorded a 2% increase year on year. Revenue from the Japanese properties remained stable over the same period.
A further positive development was the extension of master lease agreements for two Singapore nursing homes. In August 2026, the master lease agreements for Precious Homes at Bukit Merah and Precious Homes at Bukit Panjang were extended to April 2032 and May 2033, respectively. Importantly, the 2% annual rental escalations embedded in these leases have been retained, providing income visibility and inflation protection over the extended lease terms.
Investment Challenges
Significant DPU Decline Expected Pending Capital Redeployment
The most pressing challenge facing First REIT is the expected sharp decline in DPU following the divestment of its Indonesian properties. With the 11 divested Indonesian properties no longer contributing to earnings, Phillip Securities Research expects FY27e DPU to plunge to 1.24 Singapore cents, representing a decline of 33% year on year. This figure includes the second half of the S$9.7 million special distribution to be paid in the first quarter of 2027. Until the REIT successfully redeploys its capital into replacement assets, earnings will remain significantly diminished.
Outlook
The divestment proceeds have been used to fund debt repayment, resulting in a significant reduction in aggregate leverage from 42.1% to 27.5% in the third quarter of 2026. Leverage is expected to fall further to 15.6% following the redemption of its S$100 million 3.25% Guaranteed Bonds due in 2027. The all-in cost of debt improved by 10 basis points quarter on quarter to 3.9%, with 75.7% of debt fixed or hedged.
However, looking ahead, we note that redeploying capital into replacement assets in developed markets may prove challenging amid rising interest rates. The pivot away from Indonesia is also likely to weigh on yields, given the difficulty of finding assets in developed markets that offer comparable returns to its former Indonesian portfolio. The strategic review remains ongoing, and management has provided no updates on potential acquisitions.
Recommendation and Target Price
Phillip Securities Research maintains an Accumulate recommendation on First REIT with a lower target price of S$0.17, reduced from S$0.23 previously. The target price is based on 0.8 times third-quarter 2026 P/NAV, reflecting ongoing foreign exchange risks and uncertainty over the future portfolio composition.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
Frequently Asked Questions
Q: What was First REIT's DPU performance in 3Q26?
A: First REIT reported a 3Q26 DPU of 0.46 Singapore cents, representing a decline of 11.5% year on year. The nine-month 2026 DPU was 1.44 Singapore cents, down 12.7% year on year. This came in slightly below Phillip Securities Research estimates, forming 23% and 73% of the full-year 2026 forecast.
Q: What caused the decline in DPU?
A: The decline was driven by the depreciation of the Indonesian rupiah (down 8% year on year) and the Japanese yen (down 9.8% year on year) against the Singapore dollar, as well as the impact of the Indonesian hospital divestments.
Q: How did First REIT's income perform in local currency terms?
A: In local currency terms, nine-month 2026 revenue from the Indonesian and Singapore properties increased by 2.8% and 2% year on year, respectively, while Japan remained stable — indicating resilient underlying income.
Q: What is the status of the Indonesian hospital divestments?
A: First REIT completed the first tranche of its Indonesian hospital divestments on 24 September 2026. The potential divestment of the remaining six Indonesian hospitals to Siloam for approximately S$294.8 million under the existing put option remains under consideration.
Q: What is the expected impact on FY27e DPU?
A: With the 11 divested Indonesian properties no longer contributing to earnings, FY27e DPU is expected to decline to 1.24 Singapore cents, a drop of 33% year on year, including the second half of the S$9.7 million special distribution.
Q: How has the REIT's leverage position changed?
A: Aggregate leverage declined significantly from 42.1% to 27.5% in 3Q26, funded by divestment proceeds. It is expected to fall further to 15.6% following the redemption of its S$100 million 3.25% Guaranteed Bonds due in 2027.
Q: What dividend yield can investors expect?
A: Including special dividends, the FY26e dividend yield is 10.2%, declining to 6.9% in FY27e following the divestments.
Q: What is the our recommendation and target price?
A: Phillip Securities Research maintains an Accumulate recommendation with a lower target price of S$0.17, reduced from S$0.23 previously, based on 0.8 times 3Q26 P/NAV.
Disclaimer
These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products.
Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance.
Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries.
The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.
Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
About the author
Darren Chan
Darren has over seven years of experience across both the buy-side and sell-side. During his tenure as a fund manager, he managed multiple funds and mandates, including dividend income, growth, customised, Singapore-focused, and regionally focused strategies. He holds a First-Class Honours degree in Banking and Finance from the University of London.
UltraGreen.ai: BUY Maintained With Lower Target Price of US$0.73 — Segmenting to Defend 
Tesla Q3 2026 Results: Margin Recovery and SELL Rating Outlook 
Singapore Air Transport: Sector Rated NEUTRAL as Cargo Growth Offsets Jet Fuel Headwinds — SATS (TP S$5.01), CAO (TP S$2.01), SIA Engineering (TP S$3.90) at BUY 
Meta Platforms: BUY Rating Maintained With Target Price of US$800 as AI-Powered Advertising Drives Strong Growth 
