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Distribution at SPH REIT Exceeds IPO Forecast

A relatively new kid on the block, retail mall real estate investment trust SPH REIT (SGX: SK6U), which went public on 24th July last year, proudly announced that its distribution per unit of 1.86 cents is a 2.2% increase over its initial public offering (IPO) forecast of 1.82 cents.

It released its latest results, for the financial period covering 24th July 2013 to 30th Nov 2013, on Thursday..

SPH REIT owns both Paragon and the Clementi Mall and it was a spin-off from newspaper publisher Singapore Press Holdings (SGX: T39). SPH owns 72.2% of the REIT and is also the sponsor of the REIT.

Gross revenue for SPH REIT was at S$70.4 million, 0.7% lower as compared to its IPO forecast. Net property income though, came in 0.5% to $51.4 million. Meanwhile, income available for distribution was at $46.5 million.

The REIT’s distribution per unit of 1.86 cents translates to an annualised distribution yield of 5.8%, based on the IPO price of $0.90 per unit.

Below is a summary of the results:

Actual (S$ ‘000)

Forecast (S$ ‘000)

% change

Gross Revenue

70,398

70,897

-0.7%

Net Property Income

51,371

51,095

0.5%

Income Available for Distribution

46,526

45,668

1.9%

Distribution per Unit (cents)

1.86

1.82

2.2%

Annualised Distribution Yield (%)

Based on IPO price of $0.90 per Unit

5.80

5.68

2.1%

Based on 29th Nov 2013’s close of $0.99 per Unit

5.28

5.16

2.3%

Source: SPH REIT results announcement

Let’s take a look at the financial strength of the REIT. As of 30th November 2013, its gearing stood at 26.7%. The average cost of debt was at 2.33% and the weighted average term to maturity was at 4.8 years. Slightly more than half of the REIT’s S$850m debt facility is fixed through a fixed rate loan and interest rate swaps. SPH REIT has no refinancing requirements till 2016.

The occupancy rate of the overall portfolio was at a perfect ten.  The individual properties have 100% occupancies as well.

Chief Executive Officer of the Manager of SPH REIT, Ms Susan Leng, said, “We are pleased that SPH REIT’s inaugural distribution has exceeded IPO forecast. Both malls have maintained their track record of 100% committed occupancy, with strong rental reversion from Paragon and steady performance from The Clementi Mall. We will continue to proactively manage our properties to deliver sustainable returns while seeking new opportunities to create value for unitholders.”

The sponsor’s assets that can be injected into SPH REIT include Seletar Mall, which is slated for completion in December this year. It is currently under development in West Sengkang. There are three confirmed anchor tenants –Shaw Theatres, NTUC Foodfare food court and Fairprice Finest.

SPH REIT’s units closed at $0.995 on Friday. With the latest net asset value at $0.90, the price-to-book ratio stands at 1.1.

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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.