Latest Earning Season – Three REITs That Are Expecting Challenging Times Ahead

Many industries are currently facing headwinds.

The more obvious ones are the oil and gas sector, shipping and banking. The less obvious, but have, nevertheless, seen increasing pressure are the property and construction industries.

Frasers Centrepoint (SGX: TQ5) has just reported weaker 2016 full-year numbers, primarily because of a weaker economy across its markets in Singapore, Australia and others.

The weaker economy has also impacted the REITs industry.

OUE Hospitality Trust (SGX: SK7) invests primarily in hospitality assets. Currently, it has three properties in its portfolio, namely, two hotels (Mandarin Orchard Singapore and Crowne Plaza Changi Airport Hotel) and the high-end retail mall, Mandarin Gallery.

“The tourism industry continues to face headwinds in the near term as consumers and corporates are likely to be conservative in their travel expenditures.”

Meanwhile, there is also higher room supply in Singapore and it has “created a highly competitive market environment [which] would likely persist.”

The trust’s income available for distribution and distribution per unit (DPU) declined by 3.3% and 28.5%, respectively, compared to a year ago.

This is mainly due to the right issue in April this year. For more information about the latest figures, please go here.

An example of the challenging environment faced by the trust is the lower committed occupancy rate in Mandarin Gallery of 89% for the reporting quarter, down from the 98%. Another example is the drop in revenue per available hotel room (RevPAR) from S$224 to S$243 at Mandarin Ochard Singapore.

Cambridge Industrial Trust (SGX: J91U) owns a diversified portfolio of 50 properties located across Singapore, with properties that range from logistics, warehousing, light industrial, general industrial, a car showroom and a workshop, to a business park.

They are located close to major transportation hubs and key industrial zones island-wide.

 summed up the latest quarterly performance as follow: “Cambridge Industrial Trust saw its revenue and distributions shrink over the past year. The trust’s progress in terms of conversion of its properties’ leases from single-tenancy to multi-tenancy may be worth watching.

Gross revenue declined 2.9%, while net property income (NPI) dropped 8.3% compared to the same quarter last year. The distribution per unit (DPU) came in at 0.987 cents, down 18.0% from a year ago.

Cambridge Industrial Trust ended the reporting quarter with an occupancy rate of 93.6%, which is down from the 95.4% a year ago.

AIMS AMP Capital Industrial REIT (SGX: O5RU) has a focus on industrial properties. Its current portfolio contains 26 properties with 25 being in Singapore and one located in Australia.

AACIR said “[The industrial leasing market] will continue to remain challenging in the short term as rents and occupancies continue to be under pressure as a result of the weak economic climate and industrial oversupply situation in Singapore.”

Gross revenue declined 4.3%, while net property income (NPI) decreased 6.9% year on year. Distributable income was down 1.4% from the S$17.8 million seen in the same period last year.

Distribution per unit (DPU) ticked down by 1.8% from 2.80 cents to 2.75 cents. Both occupancy rates and weighted average lease to expiry for the quarter were 92.7% and 2.6 years, respectively, down from the same quarter a year ago (96.5% and 3.05 years).

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.