SPH REIT’s Latest Earnings: Kicking off the Fiscal Year on a Steady Note

Yesterday, SPH REIT (SGX:SK6U) released its first quarter earnings report for its fiscal year ending 31 August 2017 (FY2017). The reporting period was from 1 September 2016 to 30 November 2016.

As a quick background, SPH REIT is an owner of two retail real estate properties in Singapore, namely Paragon and Clementi MallSingapore Press Holdings Limited  (SGX: T39) is the REIT’s sponsor, manager, and main unitholder.

You can catch up with the results of SPH REIT’s previous quarter here.

Financial highlights

The following’s a rundown on some of SPH REIT’s latest financial figures:

  1. Gross revenue was $52.6 million in the reporting quarter, up 0.9% from the same quarter a year ago.
  2. Net property income (NPI) rose 3.3% year-on-year to $41.4 million.
  3. Distribution per unit (DPU) for the reporting quarter came in at 1.34 cents, up 0.8% compared to the first fiscal quarter last year.
  4. The valuation of its properties currently stand at $3.2 billion. SPH REIT reported a net asset value per unit of $0.94 as of 30 November 2016, unchanged from a year ago.

Foolish investors may want to keep an eye on the REIT’s debt profile too. The debt profile can provide clues on how the REIT is funded and its sensitivity to the interest rate environment. This is summarized for SPH REIT below:

Source: SPH REIT’s earnings presentations

You can see that SPH REIT’s debt profile has not changed much over the past year. The level of borrowings remains the same, although there were minor improvements in the weighted average term to maturity and the average cost of debt. SPH REIT also does not have any debt to refinance in 2017.

Operational highlights and a future outlook

Both Paragon and The Clementi Mall recorded full occupancy.

For the reporting quarter, Paragon’s revenue rose by 1.2% year-on=year. There was no change in  Clementi Mall’s revenue over the same period. From an NPI perspective, Paragon and  Clementi Mall recorded increases of 3.6% and a 1.4%, respectively.

SPH REIT’s management team continues to work on smoothing out Clementi Mall’s lease expiries. Back in FY2015, 85.5% of the mall’s leases by gross rental income was due to expire in FY2017. This figure has since been brought down to 31.7% as of the reporting quarter.

Susan Leng, the chief executive of SPH REIT’s manager, shared the following comments for the reporting quarter in the earnings release:

“We are pleased that SPH REIT has kept its growth momentum with steady distribution, 100% committed occupancy and positive rental reversion for both malls.”

She also had some words on the REIT’s outlook for the current fiscal year:

“The retail environment will remain challenging in 2017 amid modest economic growth and heightened uncertainties of the global environment. Our assets are well located with clear market positioning to serve us well in embracing the challenges ahead.

We will continue to seek opportunities to create value and strengthen long-term sustainability of the properties.’’

SPH REIT last traded at a price of $0.97 per unit on Wednesday. This translates to a historical price-to-book ratio of 1.03 and a trailing distribution yield of 5.7%.

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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.