What Investors Should Know About SPH REIT’s Latest Earnings and Valuation
SPH REIT (SGX: SK6U) 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 the sponsor, manager, and main unitholder of SPH REIT.
There are two things about the REIT that investors may want to know about right now: Its latest financial performance and valuation.
Here’s a table showing important items from SPH REIT’s income statements for the quarter ended 31 May 2017 (3Q FY17), and for the quarter ended 31 May 2016 (3Q FY16):
Source: SPH REIT earnings presentation
It was a good quarter from the REIT. Net property income for 3Q FY17 was up 5.4% due to higher rental income and lower property expenses. This drove a 0.7% year-on-year increase in distribution per unit.
Another worthwhile thing to note is that Paragon and Clementi Mall both achieved 100% occupancy for the reporting period.
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 39 REITs that are in Singapore’s stock market.
Source: SGX Stock Facts
We can observe that SPH REIT has a slightly premium valuation, given its above-average PB ratio and distribution yield.