3 Things Investors Should Know About SPH REIT’s Business

SPH REIT (SGX: SK6U) is a real estate investment trust that currently owns two retail properties in its portfolio, namely, Paragon and The Clementi Mall.

Paragon is located along the famous Orchard Road shopping belt in Singapore and also contains a commercial component. Meanwhile, Clementi Mall is a suburban mall that’s located in the town of Clementi in Singapore.

Here are three things about SPH REIT’s business that investors may want to take note of:

1. Growth seen in recent earnings

Source: SPH REIT earnings presentation

The table above is a quick summary of SPH REIT’s results for its fiscal year ended 31 August 2016 (FY2016).

We can observe that SPH REIT has seen growth in the important metrics. There was higher revenue, net property income, distributions, and distributions on a per unit basis.

2. The occupancy rate

The occupancy rate for a REIT is an important metric to look at since it gauges the strength of the market demand for the REIT’s properties.

As of 31 August 2016, the occupancy rate for SPH REIT’s portfolio is at 100%. This happened even when the REIT achieved positive rental reversion of 5.4% in FY2016.

3. Presence of concentration risk

Having diversity in its portfolio helps a REIT lessen concentration risk. But, given that SPH REIT has only two properties, it’s inevitable that its portfolio is concentrated in terms of the income contributions from the properties.

But, the REIT does have a diversified stream of rental income when it comes to the trade mix of its tenants. This is summarised in the chart below:

Source: SPH REIT’s website

Moreover, the top 10 tenants of the REIT represent only 24.2% of its total rental income.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.