ESR-REIT Review @ 20 January 2021

Basic Profile & Key Statistics

ESR-REIT invests in Industrial, Business Park and Logistics properties which currently owns 57 properties in Singapore. 

Performance Review

Gross revenue and NPI decreased by 9.1% and 12.6% respectively which mainly due to conversion of master lease to multi-tenant and non-renewal/downsizing of certain tenants. Distributable income and DPU (exclude top-up from asset disposal) decreased by 14.9% and 20.7% respectively. 

YTD rental reversion is at -0.6%. which is slightly decreased from the previous quarter.

AEI for UE BizHub East and 19 Tai Seng Avenue are expected to complete in 1Q2021 and 3Q2021 respectively. Upcoming AEI is planned for 7000 Ang Mo Kio Ave 5.

Lease Profile

• Occupancy is slightly low at 91%.
• WALE is short at 3 years where the highest lease expiry of 23.9% falls in 2022 (same figure for 2023 too).
• Weighted average land lease expiry is short at 28.34 years.

Debt Profile

• Gearing is high at 41.6%.
• Cost of debt is high at 3.54%.
• Fixed rate debt % is high at 89%
• All of its debt is unsecured debt.
• WADE is short at 2.2 years where the highest debt maturity of 32.9% falls in 2025.
• Interest coverage ratio is slightly low at 3.5 times.

Diversification Profile

• All of its properties are located in Singapore
• Top property contribution is low at 15%.
• Top tenant and top 10 tenants contributions are low at 5.2% and 30.9% respectively.

Key Financial Metrics

• Property yield is slightly high at 5.7%
• Management fees over distribution is moderate at 14.8% in which unitholders receive S$ 6.76 for every dollar paid.
• Distribution on capital is high at 3.5%
• Distribution margin is low at 42.4%.

Trends

ESR-REIT and Viva Industrial Trust merger was completed in 4Q 2018, so let's focus after this period.

• Flat - Property Yield, Distribution Margin
• Slight Downtrend - Interest Coverage Ratio
• Downtrend - DPU, NAV per Unit, Distribution on Capital

Relative Valuation

• Dividend Yield -  Past 4 quarters DPU @ 2.8 cents / average yield @ 7.58% = S$ 0.37
• Price/NAV - NAV @ S$ 0.405 x average P/NAV @ 0.96= S$ 0.39 

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Short WALE
Well Spread Lease Expiry	Short Weighted Average Land Lease Expiry
100% Unsecured Debt	High Gearing Ratio
Low Top Property Contribution	High Cost of Debt
Low Top Tenant & Top 10 Tenants Contribution	Short WADE
High Distribution on Capital	High Top Geographical Contribution
	Low Distribution Margin
	DPU Downtrend
	NAV per Unit Downtrend
	Distribution on Capital Downtrend

Gross revenue, NPI and core DPU have been improved from 3Q onward which show signs of recovery and stabilization. The manager expects the industrial market rents to remain soft in 2021 due to economic uncertainties. The proposed merger with Sabana did not go through as the resolution failed at Sabana REIT's EGM. 

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 the 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.