8 Quick Things Investors Should Learn About SPH REIT

SPH REIT  (SGX: SK6U) is one of the cool companies and investment trusts in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations.

There may be useful and important information that investors can learn from the webcasts and transcripts. Last week, SPH REIT had released its earnings for its fiscal second-quarter (three months ended 29 February 2016). I had spent time listening to a webcast of the earnings release and came away with eight pieces of information that may be important for investors to note.

But before I share them, here’s a quick background of SPH REIT for context. The real estate investment trust is an owner of two retail malls in Singapore, namely Paragon and Clementi Mall. The newspaper publishing and property development group, Singapore Press Holdings Limited  (SGX: T39), is both the main shareholder and sponsor for SPH REIT. If you like to learn more about SPH REIT, you can go here and here.

With that, my notes are seen below:

  1. Paragon continues to be the mainstay of SPH REIT’s portfolio, making up of over 80% of total gross revenue and 82% of total net property income in the first-half of fiscal 2016 (fiscal year ending 31 August 2016). The remaining gross revenue and net property income came from Clementi Mall.
  2. Shopper traffic for the first-half of fiscal 2016 was steady year-on-year. It is no secret that online shopping is a growing trend that could affect shopper traffic at Singapore’s malls. Shopper traffic may be a key metric to watch for SPH REIT.
  3. SPH REIT has been hard at work. In the first-half of fiscal 2016, Paragon had renewed 64 leases. From this, SPH REIT managed to secure a positive rental reversion of 4.3% compared to the year before. The 64 leases represent 22.5% of the mall’s net leasable area.
  4. SPH REIT had a weighted average lease expiry (WALE) profile of 2 years in terms of net leasable area and 2.3 years in terms of gross rental income.
  5. Susan Leng, the chief executive of the REIT’s manager, said that Paragon’s lease expiry profile reflects that of a typical matured property. She added that Clementi Mall just completed its first lease renewal cycle in 2014. It will take a few more cycles for the lease profile to level out.
  6. Leng said SPH REIT has the first right for refusal for Singapore Press Holdings’ The Seletar Mall which was opened on 28 November 2014. The mall has achieved a committed occupancy of 100% since December 2014.
  7. Shifting to the REIT’s outlook, Leng said that Singapore’s economy is expected to grow between 1% and 3% in 2016. This compares with the 2% growth recorded in 2015. The REIT also expects the manpower crunch in Singapore to have an impact to retail and the food services sector.
  8. On tourism, Leng said that there was a 0.9% increase in tourist arrivals last year. That said, there was a decline of 6.8% in tourism receipts, mainly due to a decline in the business travel segment.

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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.