SPH REIT Review @ 6 Apr 2022

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 slightly YoY while distributable income and DPU increased YoY by 8.4% and 9.8% mainly due to an increase in finance income, lower finance expenses and lower impairment loss. Note that the distribution for 1H FY 21 includes the release of approximately S$7.3 million (0.26 cents) of FY2020 distributable income.  

Rental Reversion

Rental reversion for Singapore assets is at -6.4%. While the rental reversion for Australian assets will only be disclosed annually.

Tenant Sales

Overall, tenant sales have seen an increase in December 2021 and dropped below the 2019 average monthly sales from Jan 2022 to February 2022. No shopper traffic information was provided in this quarter's presentation.

Related Parties Shareholding

• REIT sponsor's shareholding is high at 65.083%
• REIT manager's shareholding is high at 3.915%
• Directors of REIT manager's shareholding is low at 0.033%

Lease Profile

• Occupancy is high at 98.4%
• WALE is short at 2.8 years
• Highest lease expiry within 5 years is slightly high at 27% which falls in FY23
• Weighted average land lease expiry is long at 90.59 years

Debt Profile

• Gearing ratio is low at 30.1%. Include perpetual securities, gearing is at 37%.
• Cost of debt is low at 1.66%
• Fixed rate debt % is moderate at 73%
• All debts are secured debts
• WADM is slightly low at 2.6 years
• Highest debt maturity within 5 years is moderate at 30.8% which falls in 2025
• Interest coverage ratio is high at 7.7 times
• Preferred/perpetual securities over debt is high at 18.7%

Diversification Profile

• Top geographical contribution is high at 75% 
• Top property contribution is high at 57.8% 
• Top 5 properties contribution is high at 100% 
• Top tenant contribution is low at 3.8% 
• Top 10 tenants contribution is low at 20.6%

Key Financial Metrics

• Property yield is slightly low at 4.9%
• Management fees over distribution is low at 13% in which unitholders receive S$ 7.69 for every dollar paid 
• Distribution on capital is moderate at 3.8%
• Distribution margin is high at 56.5%

Trends

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

Relative Valuation

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

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Directors of REIT Manager's Shareholding
High REIT Sponsor's Shareholding	Short WALE
High REIT Manager's Shareholding	0% Unsecured Debt
High Occupancy	High Perpetual Securities %
Long Weighted Average Land Lease Expiry	High Top Geographical Contribution
Low Gearing Ratio	High Top Property & Top 5 Properties Contributions
Low Cost of Debt	DPU Downtrend
High Interest Coverage Ratio	Distribution on Capital Downtrend
Low Top Tenant & Top 10 Tenants Contributions	Distribution Margin Downtrend
Competitive Management Fees
High Distribution Margin
Interest Coverage Ratio Uptrend

The 1H FY22 performance has improved as compared to the 2H FY21. The recent restriction easing and border opening should improve SPH REIT's performance moving forward. One thing I would like to point out is that the distribution for 1H FY 21 includes the release of approximately S$7.3 million (0.26 cents) of FY2020 distributable income. If we remove this S$ 7.3 mil, which means the distribution to unitholders is only S$ 67.8 mil. As compared to the S$ 82.6 mil distributable income, SPH REIT only distributed 82% of distributable income for 1H FY21.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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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.