Paragon REIT Review @ 24 August 2023

Basic Profile & Key Statistics

• Main Sector(s): Retail & Healthcare
• Country(s) with Assets: Singapore & Australia
• No. of Properties (exclude associate/fund): 5

Key Indicators

Performance Highlight

Gross revenue and NPI are similar YoY, however, income available for distribution and DPU have declined significantly mainly due to an increase in finance costs and a lower proportion of management fees in units.

Rental Reversion

Rental reversion is positive for Singapore properties but negative for Australian properties. Overall, it is at a positive 6.9% for 1H2023.

Tenant Sales/Footfall

Generally, the monthly footfall and tenant sales remain stable for the above 4 malls. However, tenant sales have seen a decline in May and Jun for The Clementi Mall and Figtree Grove.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 10% or more
• REIT Manager's Shareholding: Above median by 20% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Committed Occupancy: ± 5% from median
• WALE: Below median by 20% or more
• Highest Lease Expiry within 5 Years: Above median by 10% or more; Falls in 2024
• Weighted Average Land Lease Expiry: Above median by 20% or more

Debt Profile

• Gearing Ratio: Below median by 20% or more
• Gearing Ratio including Perps: ± 10% from median
• Cost of Debt: Above median by 10% or more
• Fixed Rate Debt %: Above median by 10% or more
• Unsecured Debt %: 0%
• WADM: Below median by 20% or more
• Highest Debt Maturity within 5 Years: ± 10% from median; Falls in 2025
• Interest Coverage Ratio: ± 10% from median

Diversification Profile

• Top Geographical Contribution: Above median by 20% or more
• Top Property Contribution: Above  median by 20% or more
• Top 5 Properties' Contribution: Above median by 20% or more
• Top Tenant Contribution: Below median by 20% or more
• Top 10 Tenants' Contribution: Below median by 20% or more

Key Financial Metrics

• Property Yield: ± 10% from median
• Management Fees over Operating Distributable Income: ± 10% from median; $6.13distribution for every dollar paid 
• Operating Distributable Income on Capital: ± 10% from median
• Operating Distributable Income Margin: ± 10% from median
• Operating Distribution Proportion: ± 5% from median

DPU Breakdown

• TTM DPU Breakdown
• 88.1% from Operation
• 11.9% from Management Fees Paid in Units
• TTM DPU = 98.5% of Distributable Income

Trends

* Interest coverage ratio for periods before 31 August 2022 is estimated to reflect a closer figure of adjusted ICR.

** DPU of 4Q 2022 is annualized to 3 months to have an apple-to-apple comparison.

• Uptrend: DPU from Operation
• Flat -  Committed Occupancy, Property Yield, Operating Distributable Income on Capital
• Slight Downtrend - NAV per Unit
• Downtrend - Interest Coverage Ratio, Operating Distributable Income Margin

Relative Valuation

• Dividend Yield: Average for 1y, 3y & 5y
• P/NAV: Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High REIT Manager's Shareholding	Low Directors of REIT Manager's Shareholding
High Committed Occupancy	Short WALE
Long Weighted Average Land Lease Expiry	Concentrated Lease Expiry
Low Gearing Ratio	High Perpetual Securities %
High Fixed Rate Debt %	High Cost of Debt
Low Top Tenant & Top 10 Tenants' Contributions	0% Unsecured Debt
DPU from Operation Uptrend	Short WADM
	High Top Geographical Contribution
	High Top Property & Top 5 Properties' Contributions
	Interest Coverage Ratio Downtrend
	Operating Distributable Income Margin Downtrend

The gross revenue and NPI are similar to the previous 1H, however, DPU has declined mainly due to high finance costs and high retention amount. For debt, the is no debt matured this year after the refinancing of S$ 95 million (7.4%) in July. Coupled with a high fixed rate proportion at 85%, the near-term increase in finance costs is expected to be minimal.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.