SPH REIT (SGX: SK6U) is an owner of two retail malls in Singapore, namely, Paragon and The Clementi Mall. It also owns a leasehold interest in The Rail Mall. Newspaper publisher Singapore Press Holdings Limited (SGX: T39) is the sponsor, manager, and a large unitholder of SPH REIT.
There are two things to know about the REIT right now: its latest financial performance and valuation.
Here is a table showing important items from SPH REIT’s financial performance for the first quarter of financial year ending 31 August 2019.
Source: SPH REIT Results Presentation
From the above, we can see that SPH REIT delivered a mixed quarter.
On one hand, gross revenue grew marginally by 0.6% year-on-year to S$53.8 million. Yet, net property income fell by 1.0% to S$41.8 million. The weaker performance was due to lower revenue at Paragon, cushioned by higher contribution from The Clementi Mall and The Rail Mall.
SPH REIT completed the acquisition of an 85% stake in Figtree Grove Shopping Centre on 21 December 2018. Its joint venture partner, Moelis Australia Limited, acquired the remaining stake.
As at 30 November 2018, the REIT had a gearing ratio of 26.3% while its occupancy rate stood at 99.2%.
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio and the distribution yield.
The table below shows SPH REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
Source: Stock Facts on SGX.com
We can see that SPH REIT’s valuation is at a premium to the market average, both in terms of PB ratio and distribution yield.
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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.