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10 Quick Things Investors Should Know About ESR-REIT’s Latest Earnings

Last week, ESR-REIT (SGX: J91U) released its 2017 fourth quarter and full year earnings update. As a quick introduction, ESR-REIT invests in industrial real estate, and currently has a portfolio of 48 properties located across Singapore.

Here are 10 things investors should know about ESR-REIT’s latest results:

1. Gross revenue for the reporting quarter declined by 2.2% year-on-year to S$27.2 million while net property income improved by 1.2% to S$19.9 million.

2. The bottom-line performance was worse, as the distribution per unit (DPU) fell by 6.7% to 0.929 cents.

3. Based on ESR-REIT’s DPU of 3.853 cents for 2017, and its closing unit price of S$0.56 as of 24 January 2018, the REIT has a trailing distribution yield of 6.6%.

4. As of 31 December 2017, the REIT’s gearing stood at 39.6%, which is getting a little close to the regulatory ceiling of 45%.

5. The REIT’s portfolio had a committed occupancy rate of 93.0% at the end of 2017. The REIT’s portfolio occupancy rate has been higher than the market’s in each quarter from 2015’s first quarter to 2017’s third quarter.

6. The weighted average lease expiry was at 4.3 years as of 31 December 2017. Based on rental income, 61.1% of the REIT’s leases will expire between 2018 and 2020 with another 14.4% expiring between 2021 and 2022. The rest of the REIT’s leases (24.5%) have an expiry date after 2023.

7. ESR-REIT’s top 10 tenants accounted for 38.7% of its rental income in the fourth quarter of 2017, with no individual trade sector contributing more than 12.7% of the REIT’s rental income.

8. In 2017, the REIT acquired two properties (8 Tuas South Lane and 7000 Ang Mo Kio Ave 5; both deals were completed in December) and sold two properties (23 Woodlands Terrance and 87 Defu Lane 10; both were sold in the fourth quarter).

9. ESR-REIT recently announced plans to issue up to 263.0 million new units of itself to ”rebalance its capital structure.” The exact structure and timing of the equity fund raising have not been determined, and it may take the form of a private placement and/or a non-renounceable preferential offering to existing unitholders on a pro rata basis.

10. In its earnings release, ESR-REIT gave some insightful comments on the state of its market:

“The overall industrial property market remains soft despite the improved manufacturing outlook. Global uncertainties, rising operating costs and increased supply coming onstream continued to weigh down on rents and occupancy rates.

The Jurong Town Corporation (“JTC”) 3Q 2017 Industrial Property Statistics showed prices and rental of industrial space continued to moderate in tandem with occupancy rates. The overall price and rental indices for the industrial property market fell by 0.9% and 1.1% respectively compared to the previous quarter. With more supply coming on-stream in the coming quarters, downward pressures on the prices and rentals is likely to continue.”

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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.