Suntec Real Estate Investment Trust’s Latest Earnings: Distribution Holds Steady As Revenue Rises

Suntec Real Estate Investment Trust (SGX: T82U) released its second quarter earnings report this morning. The reporting period was from 1 April 2017 to 31 June 2017.

The real estate investment trust (REIT) has a stake in the iconic Suntec City and Suntec Singapore Convention and Exhibition Centre. Suntec REIT also has one-third interest each of One Raffles Quay, Marina Bay Financial Centre (Tower 1 and Tower 2) and the Marina Bay Link Mall. It has a 30% stake in 9 Penang Road, a full interest in the 177 Pacific Highway (Sydney) development, and a 25% indirect interest in Southgate Complex (Melbourne).

You can read more about the REIT here or catch up with last quarter’s earnings here.

Financial Highlights

Here’s a quick summary for the second quarter:

1. Gross revenue rose to $87.3 million, up 10.6% from the same quarter a year ago.  

2. Net property income (NPI) also rose 12.8% year on year. NPI came in at $59.4 million, compared to $52.7 million for the same quarter a year ago.

3. Share of profit of joint ventures rose by 6% from $16.5 million in the second quarter last year to $17.5 million in the reporting quarter. The share of profit refers to its one-third interest each in One Raffles Quay and Marina Bay Financial Centre (Tower 1 and Tower 2) and the Marina Bay Link Mall, a 30% stake in Parkway Mall, and a 50% stake in South Gate Trust.   

4. Distribution per unit (DPU) was 2.493 cents, a slight decline from the 2.501 cents paid out in the second quarter a year ago. Distribution per unit from operations rose 0.3% year-on-year, but distribution from capital fell 4.4%.

5. The REIT’s portfolio was valued at $9.3 billion as of the end of 2016. It had an adjusted net asset value per unit of $2.094.

Foolish investors might want to keep up an eye on the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. This is summarised below:

Source: Suntec REIT’s earnings presentation

Suntec REIT’s financing cost slid to 2.41% while interest coverage ratio rose to 4.2 times. Around 65% of its loans are either on fixed rates or hedged. Meanwhile, the REIT has also fully refinanced its 2017 obligations. 

Operational Highlights

Revenue rose mainly from the contribution of 177 Pacific Highway. On the occupancy front, Suntec REIT’s retail occupancy was 99% while office occupancy was 98.7%. Suntec City retail footfall (year-to-date) was up 11% year-on-year while retail tenant’s sales per square foot was up 5.3% year-on-year. The REIT had a weighted average lease expiry (WALE) of 2.3 years.  

Elsewhere, the trust’s outstanding units increased by 95.7 million from the redemption of convertible bonds.

Summing up the quarter, Mr Chan Kong Leong, Chief Executive Officer of the REIT manager had this statement to add:

“Notwithstanding the uncertainties in the macroeconomic environment, we are pleased to have delivered a higher distributable income and DPU for the first half of 2017. Our assets in Australia, 177 Pacific Highway and Southgate Complex contributed to our robust performance this quarter.”

In a separate announcement, Suntec REIT also said that it had entered an agreement to acquire 477 Collins Street in Melbourne.

Foolish summary

Suntec REIT opened trading at $1.93 on Wednesday. This translates to a historical price-to-book ratio of 0.92 and a distribution yield of 5.2%.

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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 owns units in Suntec Real Estate Investment Trust.