SPH REIT (SGX: SK6U) is one of the cool public-listed entities in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for SPH REIT is here). The real estate investment trust (REIT) is an owner of two retail malls in Singapore, namely Paragon and Clementi Mall. Its main sponsor, manager, and major owner would be Singapore Press Holdings Limited (SGX: T39). You can read more about SPH REIT in here and here. What’s the story? Below are seven useful things I learned from listening to SPH REIT’s recent fiscal fourth-quarter (for the quarter and year ended 31 August 2015) earnings webcast: As mentioned in my…
The real estate investment trust (REIT) is an owner of two retail malls in Singapore, namely Paragon and Clementi Mall. Its main sponsor, manager, and major owner would be Singapore Press Holdings Limited (SGX: T39).
What’s the story?
Below are seven useful things I learned from listening to SPH REIT’s recent fiscal fourth-quarter (for the quarter and year ended 31 August 2015) earnings webcast:
- As mentioned in my earlier article on SPH REIT’s earnings, the REIT reported a gearing ratio of 25.7% for the latest quarter. SPH REIT’s low gearing ratio compares favorably with the latest gearing ratios reported by other retail REITS like Capitaland Mall Trust (SGX: C38U) and Starhill Global Real Estate Investment Trust (SGX: P40U). As of 30 June 2015, the former had a gearing ratio of 33.7% while latter had a gearing ratio of 35.5%. SPH REIT’s low number suggests that it has headroom to take on more debt for expanding its property portfolio in the future.
- Close to 30% of SPH REIT’s debt ($250 million out of $850 million) will come due in 2016. The REIT is in the process of reviewing refinancing options for this sizable tranche of loans.
- Tenant sales at Paragon fell 3.2% due to the tenancy revitalization program carried out during the fiscal year. Despite the fall, Paragon’s rental rates for FY2015 actually rose by 9.1% compared to preceding rates. In contrast, Clementi Mall’s rental rates fell 5.6% due to continuing efforts to balance out its tenant mix for a wider base of shoppers.
- In FY2015, 18.8 million shoppers had visited Paragon while 30.8 million shoppers had trotted to Clementi Mall. While there were more shoppers to Clementi Mall, tenant sales at Paragon was significantly higher. To that point, the former posted $242 million in tenant sales in FY2015 while the latter brought in $657 million.
- As a reminder, SPH REIT has the first right of refusal to Singapore Press Holdings’ Seletar Mall. The mall, which opened only in 28 November 2014, has notably enjoyed a 100% committed occupancy rate since December 2014.
- The chiller decanting project (an asset enhancement initiative or AEI) at Paragon has been completed. The project freed up new space and tenants have started trading in August this year. On top of that, SPH REIT is expected to enjoy savings from utility consumption due to the new, more efficient chillers.
- SPH REIT characterized Paragon as a premier upscale mall, in part due to its location in the heart of Singapore’s renowned shopping belt Orchard Road. Clementi Mall, on the other hand, caters to the day-to-day essentials.
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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 Chin Hui Leong doesn’t own shares in any companies mentioned.