SPH REIT Review @ 15 January 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 Review

Gross revenue increased by 10.8% YoY due to the acquisition of 50% interest in Westfield Marion in December 2019. DPU dropped by 13% YoY, in which 0.13 cent is from the release of retention. There is remaining retention of around S$ 10.9 million.

Footfall and tenant's sales for Singapore properties have improved slightly as compared to previous quarter, albeit both are still lower than pre-covid level. As for Australia properties, both footfall and tenant's sales have recovered to close to pre-covid level.

Lease Profile

• Occupancy is high at 97.9%.
• WALE is short at 2.6 years where the highest lease expiry of 29% falls in FY21.
• Weighted average land lease expiry is long at 91.45 years.

Debt Profile

• Gearing is low at 30.5%.
• Cost of debt is low at 1.82%.
• Fixed rate debt % is low at 49.1%
• All of its debt is secured debt.
• WADE is moderate at 2.7 years where the highest debt maturity of 30.8% falls in 2025.
• Interest coverage ratio is high at 4.7 times.

Diversification Profile

• Top geographical contribution is high at 73.3%.
• Top property contribution is high at 56.8%.
• Top tenant and top 10 tenants are low at 3.2% and 19.6% respectively.

Key Financial Metrics

• Property yield is low at 4.6%
• Management fees over distribution is high at 28% in which unitholders receive S$ 3.57 for every dollar paid.
• Distribution on capital is low at 1.7%
• Distribution margin is low at 28.4%.
• Including retention, management fees over distribution, distribution on capital and distribution margin would be 24.3%, 2% and 32.7%.

Trends

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

Relative Valuation

• Dividend Yield -  Past 4 quarters DPU @ 2.54 cents / average yield @ 5.18% = S$ 0.49. Including retention, DPU @ 2.93 cents / average yield @ 5.18% = S$ 0.565. 
• Price/NAV - NAV @ S$ 0.902 x average P/NAV @ 1.04 = S$ 0.94. 

Author's Opinion

Favorable	Less Favorable
High Occupancy	Short WALE
Long Weighted Average Land Lease Expiry	0% Unsecured Debt
Low Gearing	High Top Geographical Contribution
Low Cost of Debt	High Top Property Contribution
High Interest Coverage Ratio	Low Property Yield
Low Top Tenant & Top 10 Tenants Contributions	High Management Fees
	Low Distribution on Capital
	Low Distribution Margin
	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

From tenant's sales perspective, the performance has been improved to close to pre-covid level despite a relatively lower footfall. With the vaccination started in multiple countries, hopefully, more borders would be opening soon so that Paragon performance could be recovered.

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

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 the 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 as well as 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.