Basic Profile & Key Statistics
Quarter Performance Review
Gross revenue and NPU decreased by 0.3% and 5.2% respectively. Share of profits of the joint venture is less useful as this includes valuation gain/loss. A better way would be looking at distributions from the joint venture in cash flows statement, 2Q FY2021 at S$ 3.928 million; 2Q FY2020 at S$ 3.779 million, increased by 3.9%. Distribution to unitholders and DPU decreased by 18.9% and 20% respectively. This drop is mainly due to lower NPI, management takes fees in cash and distribution to Perpetual Securities holders. AAREIT has retained S$ 2.9 million in 4Q FY2020, in which S$ 1.8 million has released in 1Q FY2021.Debt Profile
Gearing ratio reduced from 35.4% to a slightly low level at 33.6%. Cost of debt is high at 3.2% despite low level of unsecured debt at 25.8%. Fixed rate debt % is moderate at 80.1%. Interest cover ratio is slightly low at 3.7 times. WADE is short at 2.6 years where the highest debt maturity of 38.8% falls in FY2025.
Diversification Profile
88.5% of income is from Singapore properties and the remaining is from Australia properties. Top property contribution is low at 14.4%, Top tenant and top 10 tenants contributions are high at 13.4% and 48.3% respectively.
Key Financial Metrics
Property yield and distribution on capital are high at 6.1% and 3.9% respectively. Management fee is moderate in which unitholders receive S$ 7.46 for every dollar paid to the manager. Distribution margin is slightly low at 46%. Adding distribution retention into the calculation, the management fees over distribution, distribution on capita and distribution margin would be 13.1%, 4% and 46.8% respectively.
Trends
Slight Downtrend - Property Yield, Distribution Margin (include retention)
Downtrend - DPU, NAV per Unit, Interest Cover Ratio
NAV per unit has been stabilized since 1Q 2017.
Relative Valuation
i) Average Dividend Yield - Average yield at 7.39%, apply the past 4 quarters DPU of 8.5 cents will get S$ 1.15. Include retention, DPU would be 8.64 cents, which will translate into S$ 1.17.
ii) Average Price/NAV - Average value at 0.99, apply the latest NAV of S$ 1.337 will get S$ 1.32.
Author's Opinion
Favorable | Less Favorable |
---|---|
Diversified Sector | Short Weighted Average Land Lease Expiry |
Low Top Property Contribution | High Cost of Debt |
High Property Yield | Low Unsecured Debt % |
High Distribution on Capital | WADE |
Concentrated Debt Maturity | |
High Top Geographical Contribution | |
High Top Tenant & Top 10 Tenants Contribution | |
DPU Downtrend | |
Interest Cover Ratio Downtrend |
With contribution from 7 Bulim Street and demand for Logistics and Warehouse space, AAREIT performance is expected to be improved by next quarter. However, if management continues to receive management fees in cash (as per 1H FY2021), then DPU would not be able to meet 2.5 cents per quarter as per the previous fiscal year.
For more information, you could refer to:
SREITs Dashboard - Detailed information on individual Singapore REIT
SREITs Data - Overview of Singapore REIT
REIT Analysis - List of previous REIT analysis posts
REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF
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 accuracy, completeness, and reliability. It should not be taken as financial advice or a 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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