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

Credit: SPH REIT Management Pte Ltd.

Last week, SPH REIT (SGX: SK6U) released its results for the third quarter of its fiscal year ending 31 August 2018 (FY2018). As a quick introduction, the REIT is an owner of three retail malls in Singapore, namely, Paragon, The Clementi Mall, and The Rail 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 declined by 2.9% year-on-year to S$51.8 million, while net property income fell by 3.8% to S$40.6 million.

2. But, the distribution per unit (DPU) remained flat at 1.37 cents compared to a year ago.

3. Based on SPH REIT’s annualised DPU of 5.48 cents (from the year-to-date DPU of 4.11 cents) and its closing unit price of S$1.00 as of 13 July 2018, the REIT has an annualised distribution yield of 5.5%

4. As of 31 May 2018, SPH REIT’s gearing stood at 25.4%, which is low compared to the regulatory gearing ceiling of 45%.

5. The REIT has a 99.6% occupancy rate as of 31 May 2018.

6. The weighted average lease expiry by gross rental income stood at 1.9 years at the end of the reporting quarter. 23.4% of the REIT’s leases (again, by gross rental income) are expiring in FY2018 and FY2019, whilst 71.5% will expire in the following two years.

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

 Paragon recorded a rental reversion rate of -6.2% for new and renewed leases in the third quarter of FY2018. This represented 27.3% of Paragon’s net lettable area. On a slight positive note, The Clementi Mall renewed 3.2% of its leases at a positive rental reversion rate of 5.3%.

9. On 28 June, SPH REIT completed the acquisition of The Rail Mall for S$63.2 million. The mall has a remaining land lease of 28 years, and 50,000 square feet of net lettable area. SPH REIT thinks that it has the opportunity to strengthen The Rail Mall’s current food & beverage offerings and intensify community programs.

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

“According to the Ministry of Trade and Industry (MTI), the Singapore economy grew by 4.4% on a year-on-year basis in the first quarter of 2018, higher than the 3.6% growth in the previous quarter. While the outlook for the global economy has remained on a steady expansionary path since the start of the year, uncertainties and downside risks have also increased. MTI expects the economic growth forecast in 2018 to come in at “2.5% to 3.5%”, barring the full materialisation of downside risks.

Based on figures released by the Singapore Department of Statistics (DOS), the retail sales index (excluding motor vehicles) grew by 1.2% y-o-y in the first quarter of 2018, continuing the growth momentum in the last three quarters of 2017.

Singapore Tourism Board (STB) reported a 7.1% y-o-y increase in international visitor arrivals in the first three months of 2018. Tourism receipts grew by 4.0% y-o-y to S$26.8 billion in 2017.”

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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.