What Investors Should Know About SPH REIT’s Latest Results And Valuation
SPH REIT (SGX: SK6U) is an owner of three retail malls in Singapore, namely, Paragon, The Clementi Mall, and The Rail Mall. Newspaper publisher Singapore Press Holdings Limited (SGX: T39) is the sponsor, manager, and a large unitholder of SPH REIT.
There are two things investors may want to know about the REIT right now: Its latest financial performance and valuation.
Here is a table showing important items from SPH REIT’s income statement for the third quarter of financial year ending 31 August 2018 (FY2018):
Source: SPH REIT earnings update
We can see that SPH REIT had a poor quarter. Gross revenue and net property income both declined, while the REIT’s distribution per unit was flat. SPH REIT attributed its results to the negative rental reversion of 6.2% seen in Paragon during the quarter.
As of 31 May 2018, the retail REIT had a gearing ratio of 24.4%, and an occupancy rate of 99.6%.
It’s worth noting that SPH REIT completed the acquisition of The Rail Mall on 28 June 2018 for S$63.2 million.
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows SPH REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 42 REITs that are in Singapore’s stock market.
Source: SGX Stock Facts
We can see that SPH REIT is trading at a premium to the market, based on its higher PB ratio, and lower distribution yield.