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SPH REIT’s Latest Earnings: Wrapping Up the Fiscal Year on a Steady Note

Credit: SPH REIT Management Pte Ltd.

SPH REIT (SGX:SK6U) released its fourth-quarter earnings earlier this evening. The reporting period was from 1 June 2016 to 31 August 2016.

The REIT is an owner of two retail real estate properties in Singapore, namely Paragon and Clementi Mall . Its main sponsor and shareholder is  Singapore Press Holdings Limited (SGX: T39).

You can catch up with the previous quarter’s earnings here .

Financial Highlights

Here’s a rundown on the financial figures for the fourth quarter:

  1. Gross revenue was $52.2 million in the latest quarter, up 2.7% from the same quarter a year ago. For the full year, SPH REIT reported revenue of $209.6 million.
  2. Net property income (NPI) for the quarter rose 5.3% year on year. NPI came in at $40.2 million, compared to $38.2 million for the same quarter a year ago. For the full fiscal year, NPI was $160.9 million or 3.4% higher.
  3. Distribution per unit (DPU) for the quarter was flat at 1.41 cents per unit, up 1.4% compared to the fourth quarter last year. For FY2016, DPU came to a total of 5.5 cents per unit.
  4. The valuation of its properties stood at $3.2 billion. Adjusted net asset value per unit was $0.94, as of 31 August 2016.   

Foolish investors might want to keep up an eye with the REIT’s debt profile . The debt profile may provide clues on how the REIT is funded, and its sensitivity to the interest rate environment. This is summarised below.

2016-10-06-sph-reit-debt-table

During the year, SPH REIT refinanced a $250 million debt tranche (due in July 2016) into two tranches of $125 million each. This has lengthen the weighted average term to maturity to 3.1 years, up from 2.9 years a year ago. SPH REIT also does not have any debt coming due in 2016 and 2017.

On the downside, average cost of debt increased to 2.82% as of 31 August 2016.   

Operational Highlights

Both Paragon and The Clementi Mall achieved full occupancy. For the full year, revenue from the former rose 2.5% year on year while revenue for latter inched up less than 1% year on year. From an NPI perspective, Paragon and The Clementi Mall ’s recorded 2.1% and 3.7% year on year increases, respectively.

It is worth noting that the management team is working to smooth out  Clementi Mall’s gross rental income. At the end of FY2015, 85.5% of gross rental revenue was concentrated in FY2017. This figure has been brought down to 51.6%.

Ms Susan Leng, CEO of SPH REIT Management Pte. Ltd, added the following comments for the reporting quarter below:

We are pleased that SPH REIT has delivered another year of consistent distribution growth to unitholders. The resilient performance amid a challenging retail environment is a testament to our management philosophy that treats the relationship with tenants as a partnership, focusing on sustainable returns for both tenants and landlord. We will continue to work closely with our tenants to ride through the challenges as well as seek opportunities to create long-term value for unitholders.

Leng also added some words on the outlook for the coming fiscal year:

On the outlook for FY2017, the near-term economic growth for Singapore is expected to remain modest, amid geopolitical uncertainties and deflationary trends. 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.

Foolish summary

SPH REIT last traded at $1.00 on Thursday. This translates to a historical price-to-book ratio of 1.06 and a trailing twelve months distribution yield of around 5.5%.

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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.