SPH REIT Review @ 31 March 2021

Basic Profile & Key Statistics

SPH REIT invests in retail properties in Singapore and Australia and currently owns 5 properties. Its flagship property - Paragon has healthcare exposure which leases to medical clinics.

Performance Review

Gross revenue and NPI increased YoY by 4.9% and 1.3% respectively while distributable income decreased by 1.5% YoY. DPU increased YoY by 45.2% due to partial retention released in 1H FY21 and retained distribution in FY20. From the above, there is an undistributed portion of which amounts to S$ 15.717 million (S$ 76.181 - S$ 67.764 + S$ 7.3), before retain for working capital use.

Rental reversion is at +0.4% for Singapore assets. No information disclosed on Australia assets.

Tenants sales for Clementi Mall, Westfield Marion and Figtree Grove have recovered to very close to pre-COVID times. Whereas for Paragon, its performance is affected by tourist arrivals.

Related Parties Shareholding

• REIT sponsor's shareholding is high at 65.64%
• REIT manager's shareholding is high at 3.19%
• Directors of REIT manager's shareholding is low at 0.03%

Lease Profile

• Occupancy is high at 98%
• WALE is short at 3 years
• Highest lease expiry within 5 years is low at 24% which falls in FY23.
• Weighted average land lease expiry is long at 91.2 years

Debt Profile

• Gearing ratio is low at 30.4%
• Cost of debt is low at 1.84%
• Fixed rate debt % is low at 49.5%
• All debts are secured debt
• WADM is moderate at 3 years 
• Highest debt maturity within 5 years is moderate at 30.6% which falls in 2025
• Interest coverage ratio is high at 5.4 times
• Preferred/Perpetual Securities over Debt is high at 18.6%

Diversification Profile

• Top geographical contribution is high at 72.8%
• Top property contribution is high at 56.2%
• Top 5 properties contribution is high at 100%
• Top tenant contribution is low at 3.2% 
• Top 10 tenants contribution is low at 19.6%

Key Financial Metrics

• Property yield is low at 4.1%
• Management fees over distribution is high at 20.4% in which unitholders receive S$ 4.90 for every dollar paid 
• Distribution on capital is low at 2.3%
• Distribution margin is low at 38.9% 
• Including retention, management fees over distribution, distribution on capital and distribution margin would be 15.9% (slightly high), 3% (moderate) and 49.8% (slightly high).

Trends

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

Relative Valuation

• Dividend Yield - Past 4 quarters DPU @ 3.48 cents / average yield @ 5.09% = S$ 0.685, include retention, DPU would be 4.04 cents which translate into S$ 0.795
• Price/NAV - NAV @ S$ 0.91 x average P/NAV @ 1.04 = S$ 0.945

Author's Opinion

Favorable	Less Favorable
High Sponsor's Shareholding	Low Directors of REIT Manager's Shareholding
High Manager's Shareholding	Short WALE
High Occupancy	Low Fixed Rate Debt %
Well Spread Lease Expiry	0% Unsecured Debt
Long Weighted Average Land Lease Expiry	High Perpertual Securities %
Low Gearing Ratio	High Top Geographical Contribution
Low Cost of Debt	High Top Property & Top 5 Properties Contributions
High Interest Coverage Ratio	Low Property Yield
Low Top Tenant & Top 10 Tenants Contributions	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

On a QoQ basis, SPH REIT performance is improving. With the further easing of Covid-19 measures in Singapore starting 5 April, more peoples would be able to back to their workplace and this may improve the footfall of Paragon. Coupled with the potential travel bubble arrangement between Singapore and other countries, Paragon performance should be improved in the near term. 

There is one thing puzzling me in which there is an undistributed distributable income as per the latest financial statement. This undistributed amount is around S$ 15.717 million and I couldn't find any explanation or footnote for this. Assume SPH REIT is to distribute only 90% of distributable income for FY21, this would be S$ 8.1 million, coupled with existing retention of S$ 7.2 million, the total unreleased distribution would be S$ 15.3 million, which is equivalent to 0.55 cents. 

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support as a Patron and get SREITs Dashboard PDF or Data Excel

REIT-TIREMENT Facebook Page - Support by liking my Facebook Page

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.