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Tuesday, October 05, 2021

SPH REIT Review @ 5 October 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

Gross revenue and NPI improved due to the gradual recovery of tenant sales and lower rental assistant granted as compared to the previous year. Comparison of distribution or DPU with 2H 2020 is not meaningful as a portion of the distribution is withheld in 2H 2020. Note that in this quarter, SPH REIT distributes 0.52 cents of DPU which was previously withheld from FY2020.

FY21 rental reversion is at -8.4%.

Despite the decline in visitor traffic, FY tenant sales remain resilient. The tenant sales are positive for both Clementi Mall and Westfield while marginal drop for Paragon.


In the latest quarter, tenant sales for Paragon and Figtree Grove have declined due to restrictions imposed. However, tenant sales for Clementi Mall and Westfield Marion are unaffected.

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 65.486%
  • REIT manager's shareholding is high at 3.413%
  • Directors of REIT manager's shareholding is low at 0.033%

Lease Profile

  • Occupancy is high at 98.8%
  • WALE is short at 2.7 years
  • Highest lease expiry within 5 years is slightly high at 28% which falls in FY23
  • Weighted average land lease expiry is long at 90.7 years

Debt Profile

  • Gearing ratio is low at 30.3%. Include perpetual securities, gearing is at 37.3%.
  • Cost of debt is low at 1.84%
  • Fixed rate debt % is moderate at 76%
  • All debts are secured debts
  • WADM is moderate at 2.9 years
  • Highest debt maturity within 5 years is moderate at 30.9% which falls in 2025
  • Interest coverage ratio is high at 7.3 times
  • Preferred/perpetual securities over debt is high at 18.7%

Diversification Profile

  • Top geographical contribution is high at 74.6% 
  • Top property contribution is high at 57.7% 
  • 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 moderate at 4.9%
  • Management fees over distribution is moderate at 13.6% in which unitholders receive S$ 7.35 for every dollar paid 
  • Distribution on capital is moderate at 3.6%
  • Distribution margin is slightly high at 54.2%

Trends

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

Relative Valuation

  • P/NAV - +1SD for 1y; Average for 3y & 5y
  • Dividend Yield - +1SD for 1y & 3y; Above average for 5y

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow Directors of REIT Manager's Shareholding
High REIT Sponsor's Shareholding Short WALE
High REIT Manager's Shareholding0% Unsecured Debt
High OccupancyHigh Perpetual Securities %
Long Weighted Average Land Lease ExpiryHigh Top Geographical Contribution
Low Gearing RatioHigh Top Property & Top 5 Properties Contributions
Low Cost of DebtDPU Downtrend
High Interest Coverage RatioDistribution on Capital Downtrend
Low Top Tenant & Top 10 Tenants ContributionsDistribution Margin Downtrend
The gross revenue and NPI for 2H are declined as compared to 1H due to the impact from the heightened alert in Singapore as well as lockdowns in Wollongong, Australia (which is expected to be lifted in October). Despite vaccination has roll-out globally, there are still uncertainties of whether restriction would be continued or re-imposed. Hopefully, these restrictions (including travel restrictions) could be eased so that the upcoming performance could be improved.

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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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