What You Should Know about SPH REIT’s Latest Full-Year Results

Yesterday, SPH REIT (SGX: SK6U) released its results for the period covering 24 July 2013 (its listing date) to 31 August 2014. The period is also known as “FY2014” in this article.

SPH REIT is a real estate investment trust which owns both Paragon and the Clementi Mall – both malls were previously owned by newspaper publisher Singapore Press Holdings Limited (SGX: T39) and had been hived off to create SPH REIT. Singapore Press Holdings remains as SPH REIT’s sponsor and is also a majority owner of the REIT.

Let’s run through the REIT’s financials.

Gross revenue for FY2014 was at S$222.9 million, a slight uptick from the initial public offering (IPO) forecast of S$222 million. The REIT’s top-line came in higher because of higher rental income achieved by both malls.

Net property income (NPI) for the period stood at S$165.9 million while the total amount distributable to unit-holders was at S$150.3 million – the figures were 2.7% and 4.1% higher, respectively, than the IPO forecasts. The better-than-expected NPI was due to proactive management of expenses.

Distribution per unit (DPU) for FY2014 was at 5.99 Singapore cents, which is 3.8% better than the forecasted figure. This translates to a yield of 6% for SPH REIT based on its IPO price of S$0.90 per unit.

As of 31 August 2014, SPH REIT’s gearing stood at 26%. The REIT’s average cost of debt was at 2.33% and the weighted average term to maturity of its borrowings is 4 years. SPH REIT has no refinancing requirements till 2016 at least.

Operationally, investors would be happy to know that Paragon and The Clementi Mall had achieved healthy rental reversion of 10.5% and 5.5% respectively with both malls being fully leased.

Ms Susan Leng, Chief Executive Officer of the manager of SPH REIT, commented on the year’s results:

“We are pleased that the unitholders of SPH REIT has enjoyed a commendable total return of 25.0%3 for the maiden year from 24 July 2013 (listing date) to 31 August 2014. On the outlook for FY2015, the near-term economic growth for Singapore is expected to remain modest, amidst uncertainties in the global environment and constraint of continuing manpower crunch on some domestic-oriented, labour-intensive sectors. Barring any unforeseen circumstances, SPH REIT’s two high quality and well-positioned retail properties in prime locations, are expected to remain resilient and turn in a steady performance. We are confident that our philosophy of continual enhancement will sustain future performance.”

As for SPH REIT’s future growth plans, it’s worth pointing out that it might be acquiring Seletar Mall. The mall, which is slated to be completed by the end of this year, is developed by The Seletar Mall Pte Ltd, a 70:30 joint venture company between Singapore Press Holdings and United Engineers Limited (SGX: U04).

The REIT closed at S$1.06 on Monday. At that price, the REIT has a price to book ratio of 1.14 given its latest net asset value figure of S$0.93 per unit.

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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.