Previously known as Cambridge Industrial Trust, ESR-REIT (SGX: J91U) is the sixth largest industrial REIT in Singapore. It has a portfolio of 47 industrial properties here, valued at S$1.65 billion. Earlier this week, ESR-REIT released its earnings update for the second quarter of 2018. Here are the key takeaways.
- Revenue increased 17.6% to S$32.5 million on the back of contributions from two acquisitions made in mid December 2017. Net property income, consequently, rose 22% to S$23.4 million
2. Distributable income was 12% higher at S$14 million and distribution per unit increased 4.7% to 1.001 cents. The trust received S$6.3 million ex gratia payments from the Singapore Land Authority through the compulsory acquisition of land in previous years, and paid out S$1.8 million of that to unitholders.
3. For the first half of 2018, distributable income was 7.4% higher at S$27.5 million but distribution per unit fell 5.7% to 1.848 cents from 1.96 cents in the corresponding period last year. This was largely due to higher number of units, following the preferential offering completed on 28 March this year.
4. As of 30 June 2018, ESR-REIT had a comfortable gearing ratio of 30.5%. This is an improvement from 31 December 2017, when it had a gearing ratio of 39.6%. The lower gearing was achieved through raising funds from the preferential offering mentioned above. The trust issued 263 million new units at S$0.54 apiece to raise S$141.9 million.
5. Its interest cover sits at a comfortable 4.4 times with 90.6% of its debt on fixed rates. The weighted average debt maturity stood at 2.4 years.
6. Net asset value per unit stood at 58.2 Singapore cents, down slightly from 58.4 Singapore cents in the last quarter.
7. The REIT’s portfolio occupancy improved to 91.4% from 90.7% in the first quarter of 2018. The weighted average lease to expiry rose to 4.5 years, with lease contracts expiring in FY2018 reduced to 7.3% from 18.1%.
8. 37.6% of its rental income is from single-tenanted buildings, while the remaining is from multi-tenanted. Below is a chart showing the breakdown of its asset class by rental income:
Source: ESR-REIT earnings presentation
Tenant retention rate was low at 40.6% due to non-renewal of one of its major tenants. Rental reversion rate was also negative 4.2% for the first half of 2018.
9. On 24 April, ESR-REIT announced that it plans to acquire 15 Greenwich Drive for an estimated price of S$95.8 million, 0.6% below its market valuation. The REIT is looking to fund the acquisition solely through debt, which should lead to yield-accretion for unitholders.
10. On the market outlook, the management said that the oversupply of industrial space is expected to ease towards the end of this year. The REIT has also identified two of its properties with under-utilised plot ratios and will be looking to rejuvenate its existing assets into modern facilities.
Units of ESR-REIT currently trade at S$0.52 per piece, giving a distribution yield of 7.1% and a price-to-book ratio of 0.89.
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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 writer Jeremy Chia doesn’t own shares in any companies mentioned.