The Debut of SPH REIT


SPH REIT (SGX: SK6U), the real estate investment trust of Singapore Press Holdings Limited (SGX: T39), was welcomed to the Singapore Exchange on 24 July 2013. It started trading at 2pm and it opened at $0.98, 8.9% above its initial public offering (IPO) price of $0.90 apiece. It hit an intra-day high of $1 before closing at $0.985. Close to 122 million shares changed hands, making it the top traded REIT by volume.

Overall, the IPO was approximately 37 times oversubscribed. In total, $504 million was raised. The market capitalisation of SPH REIT stands at $2.5 billion while that of the largest listed REIT in our sunny island, CapitaMall Trust (SGX: C38U), is close to $7 billion, at the time of writing.

SPH REIT provides exposure to retail and healthcare sector through Paragon and to a mid-market suburban mall integrated with a bustling bus interchange and MRT station.  The assets owned by SPH REIT includes the Paragon and Clementi Mall. It offered an annualised yield of 5.58% for Financial Year (FY) 2013. For FY 2014, the projected annualised yield was at 5.79%.

The distribution yield includes the income support for Clementi Mall. Income support is provided as the mall is in its infant stages in terms of shopper recognition, tenant performance and passing rents. The provision of income support is to reflect a more stabilised level of income for Clementi Mall.

The net property income yield for Paragon is at 4.8% while that of Clementi Mall is at 5.4%.

The gearing ratio stands at 27.3% and the average cost of interest is assumed to be 2.35% with the average loan maturity at 5 years, as stated in the IPO prospectus. The weighted average lease expiry by gross revenue is at 1.6 years. The portfolio also has 100% committed occupancy.

SPH holds at least 70% stake in SPH REIT. In the future, SPH REIT can acquire The Seletar Mall, a suburban lifestyle mall, from its sponsor, SPH. The mall is slated to be completed by end of 2014.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.