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REITs investment & personal finance


Wednesday, July 28, 2021

ESR-REIT Review @ 28 July 2021

Basic Profile & Key Statistics

ESR-REIT invests in Industrial, Business Park and Logistics properties which currently owns 58 properties (exclude fund investment) in Singapore. 

Performance Highlight

Performance has improved YoY due to the absence of rental rebates and lower property expenses.

1H 2021 rental reversion is at -1.6%.

On 28 April, ESR-REIT divested 2 non-core properties at 5% above valuation. 

ESR-REIT has completed the acquisition of 46A Tanjong Penjuru on 29 June. 

Besides the acquisition of 46A Tanjong Penjuru, ESR-REIT has also completed its maiden overseas acquisition of 10% interest in ESR Australia Logistics Partnership (EALP), which comprises 36 properties across different parts of Australia.

AEI for 10TS is ongoing and is on track to be completed by 3Q 2021. There are also 2 upcoming AEI for 16 Tai Seng Street and 7000 AMK. All these AEI would bring further value upon completion.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 9.01%
  • REIT manager's shareholding is low at 0.75%
  • Directors of REIT manager's shareholding is high at 23.42%

Lease Profile

  • Occupancy is slightly low at 91.7%
  • WALE is short at 2.8 years
  • Highest lease expiry within 5 years is moderate at 25.4% which falls in 2022
  • Weighted average land lease expiry is short at 27.62 years

Debt Profile

  • Gearing ratio is high at 42.9%
  • Cost of debt is high at 3.24%
  • Fixed rate debt % is moderate at 75%
  • All debts are unsecured debt
  • WADM is short at 2.6 years
  • Highest debt maturity within 5 years is moderate at 29.8% which falls in 2023
  • Interest coverage ratio is low at 2.8 times
  • Perpetual securities over debts is slightly high at 10.4%

Diversification Profile

  • Top geographical contribution is high at 97.8%
  • Top property contribution is low at 15.3%
  • Top 5 properties contribution is low at 48.8%
  • Top tenant contribution is low at 5.2% 
  • Top 10 tenants contribution is low at 30.6%

Key Financial Metrics

  • Property yield is high  at 5.8% 
  • Management fees over distribution is slightly low at 12.6% in which unitholders receive S$ 7.94 for every dollar paid 
  • Distribution on capital is high at 4.1%
  • Distribution margin is moderate at 48.3%

Trends


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

  • P/NAV - Higher than +2SD for 1y; Higher than average for 3y and 5y
  • Dividend Yield - Lowe than average for 1y and 3y; Average for 5y

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow REIT Sponsor's Shareholding
High Directors of REIT Manager's ShareholdingLow REIT Manager's Shareholding
100% Unsecured DebtShort WALE
Low Top Property & Top 5 Properties ContributionsShort Weighted Average Land Lease Expiry
Low Top Tenant & Top 10 Tenants ContributionsHigh Gearing Ratio
High Property YieldHigh Cost of Debt
High Distribution on CapitalShort WADM
 Low Interest Coverage Ratio
 High Top Geographical Contribution
 DPU Downtrend
 NAV per Unit Downtrend
 Distribution on Capital Downtrend

There is a lot happening in 2Q for ESR REIT, first, the divestment of 2 non-core properties, followed by the acquisition of 10% interest in the EALP fund and lastly the acquisition of 16A Tanjong Penjuru. Though performance would be improved through acquisition and AEI in upcoming quarters, however, do note that the unitholder base is also enlarged due to the recent private placement and preferential offer.


If you would like to have more detail on fundamental analysis and valuation, do consider joining REIT-TIREMENT Patreon for patron-exclusive posts. You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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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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