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Monday, July 12, 2021

SPH REIT Review @ 12 July 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 Highlight

YTD gross revenue increased YoY by 22.2% due to recovery in performance for all properties and decrease in rental relief provided to eligible tenants

Besides Paragon which is still impacted by tourist arrivals, tenant sales for other properties have recovered very close to average 2019 monthly tenant sales.  

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 65.41%
  • REIT manager's shareholding is high at 3.3%
  • Directors of REIT manager's shareholding is low at 0.03%

Lease Profile

  • Occupancy is high at 98.4%
  • WALE is short at 3 years
  • Highest lease expiry within 5 years is moderate at 25% which falls in FY23
  • Weighted average land lease expiry is long at 90.95 years

Debt Profile

  • Gearing ratio is low at 30.4%
  • Cost of debt is low at 1.86%
  • Fixed rate debt % is low at 58%
  • All debts are secured debts
  • WADM is moderate at 2.9 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 73.6%
  • Top property contribution is high at 56.8%
  • 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 4.4% 
  • Management fees over distribution is high at 16.7% in which unitholders receive S$ 5.99 for every dollar paid 
  • Distribution on capital is low at 2.9%
  • Distribution margin is moderate at 44.9%
  • Including retention, management fees over distribution, distribution on capital and distribution margin would be 14.4% (moderate), 3.4% (moderate) and 52% (high) respectively.

Trends

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

Relative Valuation

  • P/NAV is higher than +2SD for 1y and average for 3y and 5y
  • Dividend yield is higher than +1SD and average for 3y and 5y

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow Directors of REIT Manager's Shareholding
High Sponsor's ShareholdingShort WALE
High Manager's ShareholdingLow Fixed Rate Debt
High Occupancy0% Unsecured Debt
Long Weighted Average Land Lease ExpiryHigh Perpetual Securities %
Low Gearing RatioHigh Top Geographical Contribution
Low Cost of DebtHigh Top Property & Top 5 Properties Contributions
High Interest Coverage RatioLow Property Yield
Low Top Tenant & Top 10 Tenants ContributionsDPU Downtrend
High Distribution Margin (Include Retention)Interest Coverage Ratio Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

SPH REIT distributes 1.38 cents DPU this quarter (including 0.13 cents from retention), similar to pre-COVID DPU. The performance and tenant sales have seen stabilized. Albeit the phase 2 heightened alert and phase 3 heightened alert (before dining is allowed) may slightly impact the next-quarter performance.


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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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