Sabana Industrial REIT Review @ 2 February 2023

Basic Profile & Key Statistics

• Main Sector(s): Industrial, Logistics & Retail
• Country(s) with Assets: Singapore
  
• No. of Properties (exclude development/associate/fund): 18

Key Indicators

Performance Highlight

Gross revenue has improved yoy mainly due to higher contributions from New Tech Park, 30 & 32 Tuas Avenue 8, 508 Chai Chee Lane, 23 Serangoon North Avenue 5 and 10 Changi South Street 2. Despite that, NPI remains the same due to significantly higher property expenses (43.7% increase) arising from the surge in utility expenses. The amount available for distribution and DPU declined due to higher interest expenses.

Rental Reversion

Rental reversion for 2H is at 16.2%. For FY22, the rental reversion is at 12.9%.

Asset Enhancement Initiative

The AEIS of 2TTL and 10CSS2 have completed. There are also multiple ongoing AEI for New Tech Park, 508CCL and 39UR1.

For the AEI of 1 Tuas Avenue 4, the appointment of the main contractor is targeted to be in 1Q 2023. And the target completion is at the end of 2023 or early 2024.

Sensitivity to Interest Rate

For every 0.5% increase in interest rate, DPU impact would be reduced by 0.8% per annum.

Distribution Breakdown

• Distributable Income Breakdown:
• 99.8% from Operation
• 0.2% from Release of Retention/Capital
• Distribution = 100% of Distributable Income

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• REIT manager's shareholding: 0%
• Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

• Occupancy: Below median for more than 5%
• WALE: Below median for more than 20%
• Highest lease expiry within 5 years: Above median for more than 10%. Falls in 2023
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: Below median for more than 10%
• Cost of debt: Above median for more than 20%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: 100%
• WADM: ± 10% from median
• Highest debt maturity within 5 years:  ± 10% from median; Falls in 2024
• Interest coverage ratio: ± 10% from median

Diversification Profile

• Top geographical contribution: 100%
• Top property contribution: Above median for more than 20%
• Top 5 properties contribution: Below median for more than 10%
• Top tenant contribution: Below median for more than 20%
• Top 10 tenants contribution: ± Above median for more than 10%

Key Financial Metrics

• Property yield: ± 10% from the median
• Management fees over distribution: Below median for more than 10%; $7.46 distribution for every dollar paid
• Distribution on capita: ± 10% from median
• Distribution margin: Below median for more than 20%

Trends

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

Relative Valuation

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

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
Low Gearing Ratio	Low REIT Manager's Shareholding
100% Unsecured Debt	Low Directors of REIT Manager's Shareholding
Low Top 5 Properties Contribution	Low Occupancy
Low Top Tenant Contribution	Short WALE
Competitive Management Fees	Concentrated Lease Expiry
Occupancy Uptrend	Short Weighted Average Land Lease Expiry
Interest Coverage Ratio Uptrend	High Cost of Debt
Distribution on Capital Uptrend	High Top Geographical Contribution
	High Top Property Contribution
	High Top 10 Tenants Contribution
	Low Distribution Margin

The performance has been negatively impacted by the rise in interest expenses and utility expenses. Moving forward, the steady positive rental reversion (thanks to intensive AEIs) and energy-saving initiatives should help to mitigate these cost increases.

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 own findings and should not be considered as 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.