SPH REIT Review @ 12 October 2022

Basic Profile & Key Statistics

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

Key Indicators

Performance Highlight

For 2H FY22, gross revenue and NPI have improved yoy due to lower rental assistance granted and improvement in tenant sales. However, distributable income, distribution and DPU are lower yoy. The distribution for 2H 2021 included S$ 7.2 mils deferred distribution from FY2020.

While for 12M FY22, gross revenue, NPI, distributable income, distribution to unitholders and DPU have improved slightly yoy. The distribution for 12M FY22 included S$ 14.5 mils deferred distribution from FY2020.

Rental Reversion

Rental reversion is negative for both Singapore and Australia properties at -2.6% and -3.9% respectively. Note that the change for Singapore properties is measured between the average rents of the renewed & new lease terms and the average rents of the preceding lease terms; while the change for Australia properties is based on the first-year fixed rent of the new leases against the preceding final year fixed rents of the expiring leases

Tenant Sales & Monthly Footfall

Overall, tenant sales have recovered to 2019 pre-COVID average despite lower footfall than 2019 average. YoY wise, Paragon has achieved a significant 25.6% improvement in tenant sales while Clementi Mall has achieved a decent 8.8% improvement in tenant sales as well.

Related Parties Shareholding

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

Lease Profile

• Occupancy: ± 5% from median
• WALE: Below median for more than 20%
• Highest lease expiry within 5 years: Above median for more than 20%. Falls in FY24
• Weighted average land lease expiry: Above median for more than 20%

Debt Profile

• Gearing ratio: Below median for more than 10%
• Gearing ratio including perps:  ± 10% from median
• Cost of debt: Below median for more than 20%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: 0%
• WADM: Below median for more than 10%
• Highest debt maturity within 5 years: ± 10% from median; Falls in 2026
• Interest coverage ratio: Above median for more than 20%

Diversification Profile

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

Key Financial Metrics

• Property yield: ± 10% from median
• Management fees over distribution: ± 10% from median; $7.41 distribution for every dollar paid
• Distribution on capita: ± 10% from median
• Distribution margin: Above median for more than 10%

Trends

* Interest coverage ratio for past quarters is estimated to reflect a closer figure of adjusted ICR.

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

Relative Valuation

• P/NAV - Below -2SD for 1y; Average 3y; Below average for 5y
• Dividend Yield - Above +1SD for 1y, 3y & 5y

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	Concentrated Lease Expiry
High Occupancy	0% Unsecured Debt
Long Weighted Average Land Lease Expiry	High Perpetual Securities %
Low Gearing Ratio	Short WADM
Low Cost of Debt	Concentrated Geographical Contribution
High Interest Coverage Ratio	High Top Property & Top 5 Properties Contributions
Low Top Tenant & Top 10 Tenants Contributions	Interest Coverage Ratio Downtrend
High Distribution Margin	Distribution on Capital Downtrend
	Distribution Margin Downtrend

Overall, the performance remains stable. Despite the interest rate hike and inflation impact on financing costs and operational costs (e.g. energy), easing of travel and COVID-19 restrictions in Singapore and Australia could cushion the impacts. Also, SPH REIT has changed the financial year end from 31 August to 31 December, in which FY22 would consist of 16 months that include 1 September 2022 to 31 December 2022.

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 Review - 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 due to 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.