Paragon REIT's 2H FY23 Result Review

Basic Profile & Key Statistics

Key Indicators

Performance Highlight

Gross revenue and NPI have improved YoY. However, distributable income has declined significantly mainly due to higher finance costs and a reduction in the manager's fee being paid in units. Nonetheless, distribution to unitholders and DPU remain similar YoY due to the release of previously withheld distribution.

Rental Reversion

Rental reversion is positive for Singapore properties but negative for Australian properties. Overall, it is at a positive 6.3% for FY23.

Tenant Sales/Traffic

For FY23, visitor traffic is improved YoY. Additionally, tenant sales have improved for other properties besides Paragon.

Related Parties Shareholding

The REIT manager hold a relatively high proportion of shares, while the REIT sponsor and directors of the REIT manager hold a relatively low proportion.

Lease Profile

Committed occupancy is high and weighted average land lease expiry is long. However, the WALE is relatively short.

Debt Profile

The gearing ratio is low, and the proportion of fixed-rate debt is high. However, the WADM is relatively short and all debts are secured debts. Additionally, the proportion of perpetual securities is high.

Diversification Profile

The portfolio shows diversification across tenants, however, it is concentrated in terms of geography and properties.

Key Financial Metrics

The overall metrics fall within the median range. However, the management fee is high compared to operating distributable income.

DPU Breakdown

• TTM Distributable Income Breakdown:
• 88.2% from Operation
• 7.2% from Management Fees Paid in Units
• 4.6% from Release of Retention

Trends

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

Relative Valuation

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

Author's Opinion

As compared to the previous half year, gross revenue and NPI have improved slightly, but distributable has declined due to a combination of higher finance costs and more management fees being received in cash. Regarding debt, around 17.5% requires refinancing in 2024. Additionally, the first distribution rate reset of the S$300 million perpetual securities will be on 30 August 2024.

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.