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Sunday, August 30, 2020

BHG Retail REIT Analysis @ 30 August 2020

Basic Profile & Key Statistics

BHG Retail REIT (BHG) invests in retail properties in China. BHG currently owns 6 retail properties in  Beijing, Chengdu, Hefei, Xining and Dalian.


Lease Profile

Occupancy is slightly low at 92.9% and its income is received in RMB. WALE is short at 3.7 years where the highest lease expiry of 29.8% falls in FY2021. Weighted average land lease expiry is short at 24.68 years, common for China properties.


Debt Profile

Gearing ratio is healthy at 35.9%. Cost of debt is high at 3.9% despite all of debts are secured debt. Fixed-rate debt is low at 50.1% which is favorable in current low interest environment. Interest cover ratio is low at 2.6 times. WADE is short at 1.7 years where the highest debt maturity of around 97%  falls in the year 2022.


Diversification Profile

Top geographical and top property contributions are the same at 55.6%. It is considered moderate in terms of geographical and high in terms of property contribution. Top tenant contribution is high at 15.8% while top 10 tenants contribution is low at 24.4%. 


Key Financial Metrics

Property yield is slightly low at 4.9%. Management fee is competitive in which unitholders receive S$ 9 distribution for every dollar paid. Distribution on capital and distribution margin are low at 1.9% and 15.6% respectively. For the year of 2020, around 4.8% of distribution would be from income support because certain strategic investors would not receive distribution which this arrangement would end in this year end.


Related Parties Shareholding

As compared to SREITs median, manager holding a high stake while sponsor and directors of REIT manager holding lesser stake.


Trend

Note that the actual 1Q 2016 DPU is 1.5 for the period between  11 December 2015 To 31 March 2016, for a fair comparison, I have annualized it to 3 months period to around 1.219 cents. If we consider pre-COVID time, DPU is on downtrend due to the arrangement in which strategic unitholders wouldn't receive distribution. This arrangement started from IPO at initially 30% of strategic investors which gradually decrease yearly and end at 4Q 2020. NAV per unit is on a slight uptrend. Distribution margin is on a slight downtrend.


Relative Valuation

i) Average Dividend Yield  - Average yield at 6.63%, apply the past 4 quarters DPU of 2.68 cents will get S$ 0.405. 

ii) Average Price/NAV - Average value is at 0.86, apply the latest NAV of S$ 0.835 will get S$ 0.72.


Author's Opinion

FavorableLess Favorable
Top 10 Tenants WeightageIncome Received in RMB
Management FeeWALE
 Concentrated Lease Expiry
 Weighted Average Land Lease Expiry
 Cost of Debt
 Unsecured Debt
 Interest Cover Ratio
 WADE
 Concentrated Debt Maturity
 Top Property Weightage
 Top Tenant Weightage
 Distribution on Capital
 Distribution Margin
 DPU Downtrend

BHG 1H performance is greatly affected by COVID. In 1Q 2020, 2 properties closed from February 2020 to 10 March and 4 properties operating hour being reduced. All properties have resumed normal operation since end March. With the recent news in which China GDP grew by 3.2% yoy in 2Q 2020, BHG performance is likely to be improved.


For more information, you could refer:

SREITs Dashboard - Detailed information on individual Singapore REIT as well as summary

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*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. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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