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SPH REIT’s Latest Earnings: More Of The Same

Yesterday, SPH REIT (SGX:SK6U) released its third quarter earnings report for its fiscal year ending 31 August 2017 (FY2017). The reporting period was from 1 March 2017 to 31 May 2017.

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

You can catch up with the results from the REIT’s last quarter here.

Financial highlights

The following’s a rundown on some of the important financial figures for SPH REIT’s reporting quarter:

1. Gross revenue was $53.3 million for the quarter, up 2.1% from a year ago.

2. Net property income (NPI) rose 5.4% year-on-year to $42.2 million.

3. Distribution per unit (DPU) for the quarter was 1.37 cents, up 0.7% from the third quarter of the last fiscal year.

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

Foolish investors might also want to keep an eye on the REIT’s debt profile. The debt profile provides clues on how the REIT is funded, and its sensitivity to the interest rate environment. These are summarised for SPH REIT below:


Source: SPH REIT’s earnings presentations

Over the past year, there have been minimal changes in SPH REIT’s debt profile. There was a slight decline in the average cost of debt, and a slight increase in the weighted average term to maturity to 2.3 years. These are signs that SPH REIT has been able to maintain its average cost of debt while refinancing its borrowings.

SPH REIT also maintained a low gearing ratio of 25.6%, which gives it room to borrow more in the future if necessary.

Operational highlights

Clementi Mall and Paragon both reported committed occupancy rates of 100%. SPH REIT’s top-line growth came from Paragon, which saw an increase from $128.1 million in the third fiscal quarter last year to $130.4 million in the reporting quarter. Clementi Mall’s revenue inched up to $29.5 million.

From an NPI perspective, Paragon recorded $104.4 million, an increase from the $99.3 million recorded a year ago. Clementi Mall’s NPI also saw a bit of growth to $21.9 million.

Susan Leng, the CEO of SPH REIT’s manager, shared the following comments on the REIT’s reporting quarter in the earnings release:

“SPH REIT has continued to maintain its track record of 100% committed occupancy and delivered stable performance.

We remain committed 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 in the retail industry, including optimization of sales productivity, embracing the fast-changing consumer expectations, identifying opportunities in e-commerce and technology advancement. This firm partnership and the well-established positioning of our properties would underpin the long-term sustainability of SPH REIT.”

SPH REIT’s units closed at $0.995 each on Wednesday. This translates to a price-to-book ratio of 1.06 and a trailing distribution yield of about 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.