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What Investors Should Know About SPH REIT’s Latest Earnings and Valuation

Credit: SPH REIT Management Pte Ltd.

SPH REIT (SGX: SK6U) 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.

There are two things about the REIT that investors may want to know about right now: Its latest financial performance and valuation.

Financial performance

Here’s a table showing important items from SPH REIT’s income statement for the first quarter of its financial year ending 31 August 2018 (FY18).


Source: SPH REIT First Quarter Result For Year Ending August 2018

We can see that SPH REIT had a decent quarter with growth in gross revenue, net property income, and income available for distribution. Its distribution per unit was also flat. The REIT’s stronger performance was mainly driven by higher rental income from its properties.

Susan Leng, the chief executive officer of SPH REIT’s Manager, provided a good summary of the REIT’s latest quarterly results in the earnings update:

“SPH REIT has continued to maintain its track record of 100% committed occupancy and delivered steady performance. The Singapore economic outlook has improved and retail sales have shown some signs of recovery since June 2017. If the recent growth momentum sustains, SPH REIT malls will be well-poised to benefit from it.

We remain focused to seek opportunities to continually strengthen the quality and positioning of our properties and create value for unitholders.”

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows SPH REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts

We can see that SPH REIT is trading at a premium to the market, based on its higher PB ratio, and lower distribution yield.

We believe we’ve identified a REIT dividend dynamo whose financials are strong enough to qualify its dividend as “safe” – and have profiled this stock in a research report that’s now available to download completely free of charge. Simply click here to claim your copy today!

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.