How did Sabana Shariah Compliant REIT Fare in the Latest Quarter?

World’s largest listed Shari’ah Compliant real estate investment trust (REIT), Sabana Shariah Compliant REIT (SGX: M1GU), released its third quarter results yesterday. Let’s take a look at some key points from the results release.

  1. Financial Performance

For the quarter, gross revenue increased by 16.3% year-on-year to S$25.1 million. This was mainly due to contribution from newly-acquired premise at 508 Chai Chee Lane and higher gross revenue from 151 Lorong Chuan, which was converted into a multi‐tenanted lease arrangement in the fourth quarter of last year.

Net property income, however, dropped 9.8% to S$18 million on the back of higher property expenses.

Income available for distribution decreased by 18.4% to S$12.4 million mainly due lower net property income, rent‐free period granted to new tenants secured during the quarter, and higher profit expense incurred on higher borrowings outstanding.

Consequently, distribution per unit (DPU) dropped 23.9% from 2.38 Singapore cents last year to 1.81 Singapore cents in the latest quarter. Based on the closing price of S$1 on Wednesday, the annualised dividend yield stands at 7.2%.

  1. Capital Prudence

As of 30 September 2014, the gearing ratio stood at 37%, same as at the end of last year. The weighted average term-to-maturity of the loans was at 2.3 years, with the average interest rate at 3.1%.

  1. Looking Ahead

In August 2014, the REIT said it will be acquiring 10 Changi South Street 2, a purpose‐built part single‐storey/part six‐storey warehouse building. Upon successful completion of the acquisition, a ten‐year leaseback agreement with the vendor, Adviva Distribution Pte. Ltd, will be inked. The property is expected to contribute to the top line in the later part of fourth quarter this year.

Also in the fourth quarter this year, Sabana REIT will have three master leases expiring. New master leases for two of the three properties are in the process of being signed. The remaining property is expected to be converted into a multi-tenanted one. Overall portfolio occupancy increased from 90.8% in the second quarter of this year to 91.8% in the latest quarter.

At yesterday’s closing price of S$1, the REIT has a price-to-book ratio of 0.93, given its latest net asset value figure of S$1.08 per unit.

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