10 Quick Things That Investors Should Know About SPH REIT’s Latest Earnings

In early January, SPH REIT (SGX: SK6U) released its results for the first quarter of its fiscal year ending 31 August 2018 (FY2018). As a quick introduction, the REIT is an owner of two retail malls in Singapore, namely, Paragon and Clementi Mall. Newspaper publisher Singapore Press Holdings Limited (SGX: T39) is the sponsor, manager, and a large unitholder of SPH REIT.

Here are 10 things about SPH REIT’s results that investors may want to know about:

1. Gross revenue for the reporting quarter grew 1.7% year-on-year to S$53.48 million, while net property income improved by 1.9% to S$42.19 million.

2. But, the distribution per unit (DPU) remained flat at 1.34 cents compared to a year ago.

3. Based on SPH REIT’s annualised DPU of 5.36 cents (from the aforementioned quarterly DPU of 1.34 cents) and its closing unit price of S$1.07 as of 19 January 2018, the REIT has an annualised distribution yield of 5.0%

4. As of 30 November 2017, SPH REIT’s gearing stood at 25.4%, which is low compared to the regulatory gearing ceiling of 45%.

5. Both of the REIT’s malls are at a 100% committed occupancy rate.

6. The weighted average lease expiry by gross rental income stood at 2.0 years at the end of the reporting quarter. 37.6% of the REIT’s leases are expiring in FY2018 and FY2019.

7. SPH REIT has the right of first refusal (ROFR) on one property, namely, Seletar Mall, which opened in November 2014.

8. There’s some bad news: Paragon recorded a rental reversion rate of -10.6% for new and renewed leases in the first quarter of FY2018, which were mostly committed a year ago. This represented 4.4% of Paragon’s net lettable area.

9. In the reporting quarter, visitor traffic to the REIT’s malls “remained steady.”

10. Here’s the outlook provided by the REIT in its earnings update:

“Based on advance estimates of the Ministry of Trade and Industry (MTI), the Singapore economy grew by 3.5% year-on-year in 2017. MTI expects the pace of economic growth to moderate in 2018 but remain firm with forecast of “1.5% to 3.5%”.

International visitor arrivals (IVA) recorded a 4.0% y-o-y growth in the first eight months of 2017. Tourism receipts grew by 10.0% to S$12.7 billion in the first half year of 2017.

The retail sales index (excluding motor vehicles) grew by 2.4% (year-on-year) in Q3 2017 and 2.5% in Q2 2017, reversing the decline in Q1 2017 (1.0%). Key trade segments registered increase in sales in Q3 2017, including departmental stores (4.6%), watches & jewellery(4.5%) and wearing apparel & footwear (4.1%).”

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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 Lawrence Nga doesn’t own shares in any companies mentioned.