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These 2 REITs Had Mixed Performances In Their Latest Earnings

It’s the earnings season again. As is common with every earnings season, there will be some companies posting growth, some posting mixed numbers, and some experiencing declines. Let’s take a look at two REITs that delivered mixed performances recently.

The first on the list is ESR-REIT (SGX: J91U). As a quick introduction, ESR-REIT invests in industrial real estate and currently has a portfolio of 48 47 properties located across Singapore.

Gross revenue for the first quarter of 2018 grew by 21.2% year-on-year to S$33.6 million while net property income (NPI) improved by 20.8% to S$23.8 million. Yet, distribution per unit (DPU) was down by 15.6% year-on-year to 0.847 cents. The decline in DPU was due to an increase in the number of units outstanding. As of 31 March 2018, the REIT’s gearing stood at 39.6% 30% whilst its committed occupancy rate was 90.7%.

Adrian Chui, chief executive of the REIT’s manager, commented on the latest quarter:

“We continue to build upon the strong foundations established in 2017 in order to enable ESR-REIT to capture growth opportunities within our portfolio and externally as the overall economic situation improves. Our recent Preferential Offering, supported by financial commitment from our Sponsor ESR, was well-received and was 1.7 times oversubscribed. This has enabled us to lower our gearing to 30.0%, providing us with c.S$458.2 million in debt headroom.”

In terms of outlook, Chui said:

“Although we are still seeing some headwinds, we are cautiously optimistic on the outlook of the Singapore industrial market.

With our financial flexibility, we will continue to focus on our strategy of pro-active asset management and rejuvenation, asset acquisitions, development projects and appropriate M&A transactions, with a focus on boosting portfolio quality, resilience and optimising Unitholder returns.”

The next REIT on the list is SPH REIT (SGX: SK6U). As a quick introduction, SPH REIT 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 SPH REIT.

Gross revenue for the 2018 second-quarter declined 0.8% while NPI dropped by 1.1% as compared to the same period last year. The lower NPI was due to lower rental income in Paragon and higher utility rate. Despite reporting lower NPI, SPH REIT’s DPU came in flat at 1.40 cents. As of 31 March 2018, the REIT’s gearing was 25.4% while its committed occupancy rate came in at 100%.

Susan Leng, chief executive of the REIT’s manager, commented on the latest results:

“SPH REIT has delivered stable distribution and our well-positioned malls continued their track record of full occupancy. In keeping with our philosophy of treating tenants as business partners, we will work closely with them to ride through both cyclical and structural challenges in the retail environment. It is encouraging that our tenant sales have continued to register growth.

The tourist arrivals and spend for 2017 ended on a positive note and we believe Paragon would stand to benefit with this trend. The forecasted GDP growth of “1.5% to 3.5%” bodes well for Singaporeans and The Clementi Mall is well poised in the suburban to continue to serve its immediate catchment. Our focus remains to drive long-term value of our properties and deliver sustainable returns for our unitholders.”

Editor’s note: Updated 2 key figures – the number of properties owned and the REIT’s gearing ratio.