Last week, ESR-REIT (SGX: J91U) released its 2018 second quarter earnings update. As a quick introduction, ESR-REIT invests in industrial real estate, and currently has a portfolio of 47 industrial properties located across Singapore.
Here are 10 things investors should know about ESR-REIT’s latest results:
1. Gross revenue for the reporting quarter grew by 17.6% year-on-year to S$32.5 million while net property income improved by 22.0% to S$23.4 million.
2. Similarly, distribution per unit (DPU) grew by 4.7% to 1.001 cents.
3. Based on ESR-REIT’s annualised DPU of 3.696 cents (from its DPU of 1.848 cents for the first half of 2018) and its closing unit price of S$0.51 as of 20 August 2018, the REIT has an annualised distribution yield of 7.2%.
4. As of 30 June 2018, the REIT’s gearing stood at 30.5%, which is a safe distance from the regulatory gearing ceiling of 45%.
5. The REIT’s portfolio had a committed occupancy rate of 91.4% at the end of the quarter.
6. The weighted average lease expiry was at 4.5 years as of 30 June 2018.
7. ESR-REIT’s top 10 tenants accounted for 41.6% of its rental income in the second quarter of 2018, with no individual trade sector contributing more than 12.1% of the REIT’s rental income.
8. Earlier this year, ESR-REIT and Viva Industrial Trust (SGX: T8B) had proposed a merger. An extraordinary general meeting will be held on 31 August 2018 for investors in both REITs to vote on the matter,.
9. In April 2018, ESR-REIT proposed to acquire 15 Greenwich Drive, a modern four-storey ramp-up logistics facility. This acquisition is expected to by completed by the fourth quarter of 2018.
10. In its latest earnings update, ESR-REIT shared the following useful comments on its business environment and outlook:
“The oversupply of industrial space that is expected to ease towards the end of 2018. Amidst continuing challenging market conditions and growing uncertainty over the macroeconomic and global trade outlook, the Manager intends to continue to focus on its long-term strategy of organic growth, acquisition and development growth and prudent capital management.
ESR-REIT’s organic growth will come from developing the unutilized plot ratio that could potentially create up to 1.0 million sq ft of potential new Gross Floor Area (“GFA”) and rejuvenating its existing assets into modern facilities that cater to the requirements and standards of tomorrow’s industrialists. Two potential properties with unutilized plot ratios have been identified: 7000 Ang Mo Kio Avenue 5 has c.495,000 sq ft of untapped GFA at its overground carpark and 3 Tuas South Avenue 4, which is located within the JTC Tuas Bio-Medical Park, has c.500,000 sq ft of untapped GFA which could be further redeveloped for Pharmaceutical use.
Feasibility studies are also currently being carried out on several assets to carry out AEI and redevelopment projects such as upgrading and improvement of building specifications, change of building use to align with current market trends and redevelopment and amalgamation of adjacent sites to enjoy economies of scale.”
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The information provided is for general infrmation 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.