Soilbuild Business Space REIT Analysis @ 17 July 2020

Basic Profile & Key Statistics

Soilbuild Business Space REIT, as its name implied, gets its majority income from business parks properties. It is 1 of the very few SREITs which is still maintaining quarter reporting and quarterly dividend.

Lease Profile

Occupancy is low at 89.5%; WALE is low at 3.4 years as well. However, its lease is well spread where the highest expiry is only 20.2% in year 2023. Weighted average land lease expiry is short at 46.39 years.

Debt Profile

Gearing, cost of debt and fixed rate is slightly higher than SREITs median level. Unsecured debt is low at 59.6%. The interest cover is low at 3.6 times. WADE is also short at 1.9 years. 37.7% of its debt is matured at 2021 which post a concentrated debt maturity risk. 

Diversification Profile

Soilbuild is not diversified in terms of geographical and property. Top geographical and top property contributed 83.3% and 31% respectively. Top tenant contribution is close to SREITs median level; however, top 10 tenants contribution is high at 43.5%.

Key Financial Metrics

Property yield is lower than SREITs median at 5.1%. Management fees over distribution is low at 10% which translates into S$ 10 dividend for every dollar paid. The distribution margin is close to median level at 48.6%.

Related Party Shareholding

Directors of REIT Manager holding of 10.02% is very high. However, REIT sponsor and REIT manager holding are at the low side.

Trend

DPU, NAV per unit, and distribution trend are trending down for the past 5 years.

Fundamental Valuation

Favorable	Less Favorable
Diversified Sector	Occupancy
Well Spread Lease Expiry	WALE
Management Fee	Weighted Average Land Lease Expiry
	Unsecured Debt
	Interest Cover Ratio
	WADE
	Concentrated debt maturity risk
	Top Geographical Contribution
	Top Property Contribution
	Top 10 Tenants Contribution
	DPU Downtrend
	NAV per Unit Downtrend
	Distribution Margin Downtrend

Relative Valuation

i) Average Dividend Yield

Average value at 8.15%, apply past 4 quarters' DPU of 3.471 cents will get S$ 0.425. However, if we consider DPU without retention due to COVID situation, DPU is estimated to be at 3.582 cents, which translates into S$ 0.44.    

ii) Average Price/NAV 

Average value is at 0.94, apply the latest NAV of $0.586 will get S$ 0.55

Author's Opinion

Even before COVID, its DPU and NAV per unit keep dropping from quarter to quarter. Soildbuild Business Space REIT management should do something to stop its fundamentals from deteriorating. Let's sum out the valuation:

i) Fundamental Intrinsic Value = (Removed)

ii) Relative Valuation - Dividend Yield = S$ 0.44

iii) Relative Valuation - Price/NAV = S$ 0.55

At current price of $0.415, it is undervalued in terms of relative valuation. 

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Please always do your own due diligence before any decision is made.