What a perfect storm for First Reit share price! In December 2018, I wrote an article “Dark chapter for high-flying First REIT”. In that article, I highlighted the two key risks for First Reit – over-reliance on its Sponsor (PT Lippo Karawaci, LPKR) for rental income and currency exchange risks. Indeed, my worst fear came true when First Reit share price blew up spectacularly in 2020. Should investors run for their lives or fight to the very end?
Make no mistake, COVID-19 pandemic should not be seen as the attributing factor for the collapse of First Reit share price. Troubles actually began to brew way back in 2018 when LPKR embarked on the massive Meikarta real estate development in Indonesia. Costing USD21 billion, this is the largest project that the Riady family has taken so far. The required funding is colossus. As such, the amount involved drained the conglomerate’s cash flow and impacted the liquidity of the Group.