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Tuesday, July 27, 2021

Sabana Shari'ah Compliant Industrial REIT Review @ 27 July 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 Highlight

Performance improved YoY due to higher contribution from certain properties, write-back of impairment loss from the previous year and absence of rental waiver in 2021.

1H rental reversion is at 11.8%, which is a significant improvement as compared to the previous few years.

AEI completed for 23SNA5, 10CCS2 and phase 1 of 8CL. Phase 2 of 8CL and rejuvenation of passenger lifts and toilets of 151LC are ongoing. All these lead to an increase in property valuation.

NTP+ Lifestyle Mall AEI has been completed in 1Q 2021 where it achieves 97.4% occupancy as of 30 June.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 20.88%
  • REIT manager's shareholding is low at 0%
  • Directors of REIT manager's shareholding is low at 0%

Lease Profile

  • Occupancy is low at 83.4%
  • WALE is short at 2.8 years
  • Highest lease expiry within 5 years is moderate at 26.5% which falls in 2023
  • Weighted average land lease expiry is short at 31.62 years

Debt Profile

  • Gearing ratio is slightly low at 34.9%
  • Cost of debt is high at 3.4%
  • Fixed rate debt % is low at 60.4%
  • All debts are secured debt
  • WADM is short at 2 years
  • Highest debt maturity within 5 years is high at 40.3% which falls in 2024
  • Interest coverage ratio is moderate at 4.1 times

Diversification Profile

  • All of its properties are located in Singapore
  • Top property contribution is high at 21.5%
  • Top 5 properties contribution is low at 44.7%
  • Top tenant contribution is moderate at 11.1% 
  • Top 10 tenants contribution is high at 45.8%

Key Financial Metrics

  • Property yield is moderate at 5.3% 
  • Management fees over distribution is low at 11% in which unitholders receive S$ 9.09 for every dollar paid 
  • Distribution on capital is high at 4.6%
  • Distribution margin is moderate at 50.7%

Trends


Let's look at the period from 1Q 2017 when strategic review started to take place.
  • Uptrend - Interest Coverage Ratio
  • Flat - Distribution on Capital, Distribution Margin
  • Slight Downtrend - NAV per Unit, Property Yield
  • Downtrend - DPU

Relative Valuation

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

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow REIT Sponsor's Shareholding
Low Top 5 Properties ContributionLow REIT Manager's Shareholding
Competitive Management FeesLow Directors of REIT Manager's Shareholding
High Distribution on CapitalLow Occupancy
Interest Coverage Ratio UptrendShort WALE
 Short Weighted Average Land Lease Expiry
 High Cost of Debt
 Low Fixed Rate Debt %
 0% Unsecured Debt
 Short WADM
 Concentrated Debt Maturity
 High Top Geographical Contribution
 High Top Property Contribution
 High Top 10 Tenants Contribution
 DPU Downtrend

Sabana's performance has seen improvement compare to the previous year, mainly for occupancy, interest coverage ratio and rental reversion. Besides this, Sabana has entered into a Facility Agreement for up to S$225.0 million of unsecured loan, lengthening the WADM and turning approximately 70% of its debts into unsecured debt. Sabana has also announced that it would remove the Syariah-compliance requirement which is expected to be effective around October. All of these should improve Sabana fundamentals and performance in upcoming quarters.


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*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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