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REITs investment & personal finance


Monday, April 26, 2021

ESR-REIT Review @ 26 April 2021

Basic Profile & Key Statistics

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

Performance Highlight

Gross revenue, NPI, distributable income and core DPU increased YoY by 4.4%, 7.6%, 17.1% and 14.8% respectively. The increase is mainly due to the absence of provision for rental rebates in 1Q 2021.
Rental reversion is at negative 5%.
AEI of ESR BizPark (previously UE BizHub East) has completed and obtained TOP.  Cited from the latest annual report, this is would enhance business traffic, revitalize the property and improve the arrival experience with a refreshed retail and F&B environment. 

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 9.73%
  • REIT manager's shareholding is slightly low at 0.83%
  • Directors of REIT manager's shareholding is high at 23.54%

Lease Profile

  • Occupancy is slightly low at 90.8%
  • WALE is short at 2.9 years
  • Highest lease expiry within 5 years is slightly low at 25.3% which falls in 2023
  • Weighted average land lease expiry is short at 27.87 years

Debt Profile

  • Gearing ratio is high at 42%
  • Cost of debt is high at 3.52%
  • Fixed rate debt % is high at 88.1%
  • All debts are unsecured debt
  • WADM is slightly short at 2.7 years
  • Highest debt maturity within 5 years is slightly high at 30.9% which falls in 2023
  • Interest coverage ratio is low at 2.7 times
  • Preferred/Perpetual Securities over Debs is slightly high at 11.2% 

Diversification Profile

  • All of its properties are located in Singapore
  • Top property contribution is low at 15.3%
  • Top 5 properties contribution is low at 48.8%
  • Top tenant contribution is low at 5.3% 
  • Top 10 tenants contribution is low at 30.9% 

Key Financial Metrics

  • Property yield is high at 5.9%
  • Management fees over distribution is slightly low at 13.3% in which unitholders receive S$ 7.52 for every dollar paid 
  • Distribution on capital is high at 4%
  • Distribution margin is moderate at 47%

Trends

As ESR-REIT and Viva Industrial Trust merger was completed in 4Q 2018, so let's focus on after this period.
  • Flat - Property Yield, Distribution Margin
  • Slight Downtrend - Interest Coverage Ratio
  • Downtrend - DPU, NAV per Unit, Distribution on Capital

** The interest coverage ratio has been modified to MAS ICR. ICR for period 3Q2020 and before (besides 4Q 2019) are estimated to reflect a more closer figure to MAS ICR.


Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 3.1 cents / average yield @ 7.53% = S$ 0.41
  • Price/NAV - NAV @ S$ 0.41 x average P/NAV @ 0.97 = S$ 0.40


Author's Opinion

FavorableLess Favorable
Diversified SectorLow Sponsor's Shareholding
High Directors of REIT Manager's ShareholdingShort WALE
High Fixed Rate Debt %Short Weighted Average Land Lease Expiry
100% Unsecured DebtHigh Gearing Ratio
Low Top Property & Top 5 Properties ContributionsHigh Cost of Debt
Low Top Tenant & Top 10 Tenants ContributionsLow Interest Coverage Ratio
High Property YieldHigh Top Geographical Contribution
High Distribution on CapitalDPU Downtrend
 NAV per Unit Downtrend
 Distribution on Capital Downtrend

ESR-REIT has seen a gradual recovery from quarter to quarter. However, the manager expects the industrial leasing market to remain soft in 2021.


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 and 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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