Sabana Shari'ah Compliant Industrial REIT Review @ 25 January 2021

Basic Profile & Key Statistics

Sabana Shari'ah Compliant Industrial REIT (Sabana) invests in industrial and logistics properties which currently owns 18 properties in Singapore.

Performance Review

Gross revenue and NPI decreased YoY by 5.5% and 11.7% respectively due to lower contribution from 10 Changi South Street 2 and higher allowances for impairment loss on trade receivables for certain tenants. However, distributable income increased by by 10.7% mainly due to one-time adjustment of around $3.2 million on the non-tax deductibility of certain expenses on vacant properties for 2019. Total distribution amount declared increased by 48.1% was due to the one-time adjustment as well as release of distribution retention from 1H FY2020. Without all these, the actual DPU from operation is 1.41 cents.

Rental reversion is at +4.4% for 1H and and -0.2% for 2H. For overall FY2020, rental reversion is +0.9%.

AEI for NTP+ mall is expected to be completed in this quarter which should improve the performance. The ongoing AEI for 23SNA5 has also achieved an increased in valuation.

Lease Profile

• Occupancy is low at 76.5%.
• WALE is short at 3.1 years where the highest lease expiry of 26.2 % falls in 2023.
• Weighted average land lease expiry is short at 32.09 years.

Debt Profile

• Gearing ratio is low at 33.5%.
• Cost of debt is high at 3.1%.
• Fixed rate debt % is low at 50%.
• All of its debts are secured debts.
• WADE is short at 1.2 years where the highest debt maturity of 53 % falls in this year.
• Interest coverage ratio is low at 3.3 times.

Diversification Profile

• All of its properties are located in Singapore
• Top property contribution is moderate at 22%.
• Top tenant contribution and top 10 tenants contribution are high at 13.5% and 52.3% respectively.

Key Financial Metrics

• Property yield is slightly low at 4.9%
• Management fees over distribution is moderate at 14.8% in which unitholders receive S$ 6.76 for every dollar paid.
• Distribution on capital is slightly high at 3.5%
• Distribution margin is low at 40.6%.

Trends

Let's look at the period from 1Q 2017 when strategic review started to take place and ordinary resolution to authorize the Manager to issue units was not passed at the Annual General Meeting held on 28 April 2017.

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

Relative Valuation

• Dividend Yield -  Past 4 quarters DPU @ 2.76 cents / average yield @ 8.19% = S$ 0.335
• Price/NAV - NAV @ S$ 0.513 x average P/NAV @ 0.73= S$ 0.375

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Occupancy
Well Spread Lease Expiry	Short WALE
Low gearing ratio	Short Weighted Average Land Lease Expiry
Interest Coverage Ratio Uptrend	High Cost of Debt
	0% Unsecured Debt
	Short WADE
	Concentrated Debt Maturity
	Low Interest Coverage Ratio
	High Top Geographical Contribution
	High Top Tenant and Top 10 Tenants Contributions
	Low Distribution Margin
	DPU Downtrend

The proposed merger with ESR-REIT did not go through as the resolution failed at EGM. Although the industrial landscape remains challenging, the NTP+ looks promising and should be able to improve Sabana REIT performance moving forward. 

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.