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2 Things That Investors Should Know About SPH REIT Right Now

SPH REIT (SGX: SK6U) is an owner of two retail malls in Singapore, namely, Paragon and The Clementi Mall. Singapore Press Holdings Limited (SGX: T39) is both the sponsor and main unitholder of the REIT.

In this article, let’s look at two things to know about the REIT right now: its latest financial performance and the valuation.

Financial performance

Below is a table showing important items from SPH REIT’s financial results for the second quarter of financial year ending 31 August 2018.

Source: SPH REIT Results Presentation

The above is a slide from SPH REIT’s latest results presentation.

The REIT’s net property income (NPI) fell from S$42.7 million a year ago to S$42.3 million in the latest quarter. The year-on-year decline in NPI was due to the impact from Paragon. The development saw a rental reversion of -7.1% for new and renewed leases for the second quarter. The REIT said the lower rental reversion at Paragon was “mainly due to negotiations during the retail sales downturn since 2014”.

As at 28 February 2018, the retail REIT clocked in a gearing ratio of 25.4%, unchanged from that on 31 August 2017. The weighted average term to maturity was 2.2 years, and the average cost of debt came in at 2.84% per annum.

In all, SPH REIT achieved a stable performance for the quarter.

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 of the two valuation metrics for the 41 REITs that are listed on Singapore’s stock market.

Source: SGX StockFacts (data as of 13 April 2018)

With a PB ratio of 1.04 and a distribution yield of 5.6%, we can see that SPH REIT’s valuation is higher than the market average.

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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.