5 Things Investors Should Learn About SPH REIT’s Latest Earnings From Management
In mid-April, SPH REIT released its second quarter earnings for its fiscal year ending 31 August 2017 (FY2017). I recently spent time watching SPH REIT’s earnings presentation and noted down five things that may interest investors.
As a quick background, SPH REIT is a real estate investment trust that owns two retail malls in Singapore, namely, Paragon and Clementi Mall. Newspaper publisher and property developer Singapore Press Holdings Limited (SGX: T39) is SPH REIT’s sponsor, manager, and majority owner.
With that, here are my notes:
1. Susan Leng, the manager of SPH REIT’s manager, kicked off the briefing with the quarter’s highlights. She said SPH REIT continues to deliver stable and regular distributions. Distribution per unit was 1.40 cents, unchanged from a year ago. Leng also pointed out that SPH REIT has a low gearing of 25.7% and a high percentage of its debt carrying fixed interest rates.
2. SPH REIT’s gross revenue rose along with rental reversion. Meanwhile, expenses declined from lower utility costs and the lack of a one-off tax provision compared to last year’s expenses. Net property income (NPI) rose 5.2% as a result. Without the one-off tax provision, NPI would have climbed 2.9% year-on-year.
3. Leng said SPH REIT’s properties maintained 100% occupancy amid a tough retail environment. She added that visitor traffic was steady for the first half of FY2017.
4. Paragon secured a positive rental reversion of 4.3% in the first half of FY2017 while Clementi Mall did better with a 8.3% reversion. Rental reversions are measured based on a comparison between the average rental rate in the prior leases and the average rental rate of the new (or renewed) leases.
5. Leng said that SPH REIT’s lease expiry profile is well-staggered. She added that Paragon’s expiry profile reflected the typical profile of a matured mall. In contrast, the newer Clementi Mall is undergoing its second renewal cycle. Leng reported in the earnings presentation that 85.5% of Clementi Mall’s rentals were expiring in FY2017 as of FY2015. SPH REIT has since renewed 74% of those expiring leases so far.