10 Takeaways Investors Should Know About SPH REIT Latest Results
SPH REIT (SGX: SK6U) upped its distribution per unit in its final quarter. Let’s dig in to find out more.
SPH REIT owns a portfolio of three properties in Singapore, namely Paragon, The Clementi Mall and the recently acquired The Rail Mall. The REIT, which is sponsored by media giant Singapore Press Holdings Limited (SGX: T39) released its earnings update for the fourth quarter of its financial year ended 30 September (FY2018) last Thursday.
Here are 10 key points investors should know:
1. For FY2018, SPH REIT’s revenue declined 0.4%. However, distribution to unitholders (DPU) still inched up 0.2%. The two charts below show the breakdown in revenue and net property income by property.
Source: SPH FY18 Earnings Update
2. SPH REIT’s distribution has been consistent over the past five fiscal years, ranging between 5.43 and 5.54 cents per unit.
3. The REIT continues to have one of the lowest gearing ratios (debt-to-asset) among REITs in Singapore at 26.3%.
4. SPH REIT’s average cost of debt was 2.85%, with 69.8% of its debt on fixed rates. Weighted average debt to maturity stood at 2.3 years, with around S$210 million or 23% of its overall debt due in 2019.
5. SPH REIT portfolio had a occupancy rate of 99.4%. However, rental reversion rates were down 3.5%. This decline was largely due to lower rental rates at Paragon, which declined 3.7%. In contrast, The Clementi Mall’s rental rates improved 3.0%.
6. The REIT had a weighted average lease expiry (based on rental income) of 2.0 years. Meanwhile, 14.1% of leases are due in FY2019.
7. Visitor traffic at Paragon was up 2.7%, while The Clementi Mall‘s traffic remained flat. But tenant sales still improved at both properties, up 2.7% at Paragon and 2.2% at The Clementi Mall.
8. SPH REIT completed the acquisition of The Rail Mall for S$63.2 million. The acquisition is yield-accretive and represents the REIT’s first acquisition. To be sure, the new mall is a small piece of the overall portfolio. Elsewhere, SPH REIT has right of first refusal for The Seletar Mall, which could be another acquisition target in the future.
9. Looking ahead, SPH REIT unitholders should expect to enjoy the full year contribution from The Rail Mall in the new fiscal year. Ms Susan Leng, the CEO of the REIT manager, added that the three-year asset enhancement project at Paragon has been completed as scheduled, adding around 7,000 square feet of additional lettable area. The enhancement will contribute S$0.9 million in additional revenue per year.
10. Units of SPH REIT currently trade at S$1.00 per unit which translates to a price-to-book ratio of 1.05 and dividend yield of 5.6%.