BHG Retail REIT (SGX: BMGU) is a real estate investment trust that focuses on retail malls in China. It currently has a portfolio of five malls. Its sponsor is China-listed Beijing Hualian Department Store Co. Ltd, which is part of the Beijing Hualian Group, one of China’s largest retail operators.
Last Thursday, BHG Retail REIT announced its 2018 third quarter (3Q 2018) earnings update. Let’s look at 10 important things from the earnings announcement that investors should know:
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1. Quarterly gross revenue grew 5.1% year-on-year to S$17.3 million while net property income (NPI) improved by 3.5% to S$10.9 million.
2. Yet, distribution per unit (DPU) declined by 5.7% year-on-year to 1.33 Singapore cents.
3. Gearing as of 30 September 2018 stood at 32.7%. REITs in Singapore have a regulatory gearing ceiling of 45%, so BHG Retail REIT has plenty of debt headroom given its low gearing.
4. The committed occupancy rate of BHG Retail REIT’s portfolio stood at 97.5% at the end of the reporting quarter.
5. The weighted average lease expiry stood at a healthy 4.0 years by gross rental income.
6. About 65% of the REIT’s gross rental income and close to 80% of its net lettable area (NLA) came from tenants that are in the experiential segments.
7. Based on BHG REIT’s annualised DPU of 5.43 Singapore cents and its unit price of S$0.66 (as of time of writing), the REIT has a trailing distribution yield of 8.2%.
8. China’s economy grew by 6.7% year-on-year in the first nine months of 2018 while its retail sales growth was up 9.3% year-on-year during that period.
9. Disposable income and expenditure per capita for urban residents in China increased by 7.9% and 6.8%, respectively, in first nine months of 2018.
10. Chan Iz-Lynn, chief executive of BHG REIT’s manager, commented:
“Amidst persistent uncertainties from international trade environment, and ongoing China economic reforms, China retail outlook remains positive. In 3Q 2018, China retail sales of consumer goods rose 9.3% year-on-year to RMB 27.4 trillion. Disposable income and expenditure per capita of urban residents increased 7.9% and 6.5% year-on-year respectively in 9M 2018. For us, our portfolio of community malls nested amongst high population density precincts, continued to exhibit healthy leasing demands, rental uplifts, and sustained high occupancy rate. Looking ahead, the REIT’s strategy remains committed to drive growth organically, pursue potential accretive acquisitions, and deliver long term sustainable returns to our unitholders.”
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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.