SPH REIT’s Latest Earnings: A Steady Set of Results

Credit: SPH REIT Management Pte Ltd.

Yesterday, SPH REIT (SGX:SK6U) released its second quarter earnings report for its fiscal year ending 31 August 2017 (FY2017). The reporting period was from 1 December 2016 to 28 February 2017.

SPH REIT is an owner of two retail malls in Singapore, namely, Paragon and Clementi Mall. Newspaper publisher and property developer Singapore Press Holdings Limited  (SGX: T39) is the REIT’s main sponsor and shareholder.

You can catch up with the results from the 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 $54 million in the reporting quarter, up 1.7% from the same quarter a year ago.

2. Net property income (NPI) rose by 5.2% year-on-year to $42.7 million.

3. Distribution per unit (DPU) for the quarter was 1.40 cents, unchanged compared to the second-quarter a year ago.

4. As of 31 August 2016, SPH REIT’s properties are valued at $3.23 billion. The REIT ended its reporting quarter with a net asset value per unit of $0.94, unchanged from a year ago.

Foolish investors may also want to keep an eye on a REIT’s debt profile. The debt profile provides clues on how a REIT is funded and its sensitivity to the interest rate environment. SPH REIT’s debt profit is shown below:

2017-04-10 SPH REIT debt table
Source: SPH REIT’s earnings

SPH REIT’s debt profile did not change much compared to a year ago. Its level of borrowings remained the same, but there were minor movements in the weighted average term to maturity, the average cost of debt, and the amount of borrowings on fixed rates. SPH REIT also does not have any debt to refinance in 2017.

Operational highlights

Both Paragon and The Clementi Mall recorded full occupancy in the reporting quarter.

For the first half of FY2017, Paragon’s revenue rose 1.4% year-on-year. The Clementi Mall’s revenue inched up by 1% over the same period. From an NPI perspective, Paragon and The Clementi Mall recorded year-on-year growth of 4.5% and 3.5%, respectively.

SPH REIT’s Manager has been working on smoothing out the expiries of The Clementi Mall’s leases. Back in FY2015, SPH REIT had 85.5% of its leases (by gross rental income) expiring in FY2017. This figure has been brought down to 11.4% as of the latest earnings report.

Susan Leng, the CEO of SPH REIT’s Manager, had the following comments to share regarding the REIT’s performance:

“SPH REIT has continued to deliver resilient financial and operating performance despite the prevailing economic headwinds and weak consumer sentiment. Working in close partnership with our tenants, both malls maintained its track record of 100% committed occupancy.

We continue to curate a tenancy mix that will strengthen the positioning of each mall. Our tenants are the cornerstone of our business. Besides introducing new tenants to the malls, we proactively engage our tenants to rejuvenate their concepts and ambience of their stores. We strive to deliver stable and sustainable returns for Unitholders.”

SPH REIT’s units closed at $0.975 on Monday. This translates to a historical price-to-book ratio of 1.04 and a trailing 12 months distribution yield of around 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.