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What Investors Need to Know About Soilbuild Business Space REIT’s Latest Earnings

Soilbuild Business Space REIT (SGX: SV3U) is a real estate investment trust (REIT) that owns a total of 12 business parks and industrial properties in Singapore. Its portfolio of properties includes Solaris, Eightrium @ Changi Business Park, Tuas Connection, and Bukit Batok Connection.

Yesterday, the REIT announced its financial results for the full year ended 31 December 2017 (FY2017). Here are 11 things investors should know from the earnings announcement:

1. Gross revenue for the latest period rose 4.5% year-on-year to S$84.8 million.

2. Net property income (NPI) grew from S$70.7 million last year to S$73.5 million in FY2017, an increase of 4%. The growth in gross revenue and NPI were attributed mainly to “the full year contribution from Bukit Batok Connection, a property acquired in September 2016”.

3. However, distributable income inched down 0.5% year-on-year to S$59.9 million.

4. Distribution per unit (DPU) slumped 6.2%, from 6.091 cents in FY2016 to 5.712 cents in FY2017. On a quarter-on-quarter (q-o-q) basis, DPU improved from 1.374 cents in the 2017 third quarter to 1.383 cents in the 2017 fourth quarter.

5. The net asset value per unit, as at 31 December 2017, was 0.64 cents, down from 0.72 cents at the end of 2016.

6. As at the end of last year, the portfolio occupancy rate stood at 92.7%. This marked a fall from the 2017 third quarter’s figure of 94.1% but a rise as compared to FY2016’s 89.6%.

7. In FY2017, a negative rental reversion of 9.2% was recorded for new and renewal leases.

8. The weighted average lease expiry by gross rental income was at three years.

9. Last month, the REIT’s manager made public the proposed divestment of 61 and 71 Tuas Bay Drive (KTL) for S$55 million. The buyer would be SB (Pioneer) Investment Pte Ltd, a wholly-owned subsidiary of Soilbuild REIT’s sponsor. The divestment, subject to the approval of unitholders, is expected to be completed in the first quarter of this year.

10. As at 31 December 2017, the REIT had a gearing of 40.6%. The weighted average borrowing cost stood at 3.31% per annum, and the weighted average debt expiry was 2.7 years.

11. The chief executive of the REIT’s manager, Roy Teo, commented on the latest results:

“We are pleased to report that amid the subdued industrial market, Soilbuild REIT has maintained its DPU q-o-q. The portfolio continues to face headwinds from the oversupply of industrial space in Singapore. In the short term, our focus is to maintain the portfolio occupancy level which may require us to compromise on rental rates. In line with our proactive portfolio management strategy, we are also pleased to propose the divestment of KTL. The divestment will free up capital and provides greater financial flexibility for our pursuit of other growth drivers when opportunities arise in 2018.”

Soilbuild REIT’s units are now changing hands at S$0.695. This gives a price-to-book ratio of 1.09 and a distribution yield of 8.2%.

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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 Sudhan P doesn’t own shares in any companies mentioned.