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2 REITS That Have Delivered Mixed Performances Recently

It’s earnings season again. Given many REITs are reporting their results at the same time, it would be useful to group them into three categories – good, bad and mixed.

In this article, I will look at two REITs that have recently delivered mixed financial results.

We will start with SPH REIT (SGX: SK6U).

As a quick introduction, SPH REIT 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 large unitholder of SPH REIT.

For the quarter ended 30 November 2018, SPH REIT reported that gross revenue grew marginally by 0.6% year-on-year to S$53.8 million. Yet, net property income (NPI) 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. Distribution per unit (DPU) was flat as compared to a year ago at 1.34 cents.

As at 30 November 2018, the REIT clocked in a gearing ratio of 26.3% while its occupancy rate stood at 99.2%.

Susan Leng, chief executive of SPH REIT’s manager, said:

“We are pleased that SPH REIT continued to deliver steady distribution with overall positive rental reversion of 9.7% for 1Q 2019.

In line with our strategy of acquiring yield-accretive retail properties that provide sustainable returns to unitholders, SPH REIT completed the acquisition of 85% stake in Figtree Grove Shopping Centre, with our joint venture partner, Moelis Australia Limited holding the remaining stake. The property is an established sub-regional shopping centre in Wollongong, New South Wales, Australia and is a strategic fit with SPH REIT’s portfolio of quality assets. This acquisition provides SPH REIT with the opportunity to further create value and continue to deliver long term returns for unitholders. The full contribution from Figtree Grove Shopping Centre is expected in the second half of the year.”

The next REIT on the list is Suntec Real Estate Investment Trust (SGX: T82U).

As a quick introduction, Suntec REIT is one of the largest REITs in Singapore and currently has interests in retail malls and offices in Singapore and Australia. Its portfolio includes Suntec City, one-third interest in One Raffles Quay, a commercial building in Sydney and a 50% stake in Southgate Complex in Melbourne.

Chong Kee Hiong, chief executive of Suntec REIT’s manager, commented:

“We are pleased to have recorded a higher distributable income for 2018. Suntec City Mall has performed well with improved occupancy, higher footfall and tenants’ sales. The acquisition of the additional 25% interest in Southgate Complex also contributed to the stronger performance. This was however offset by higher financing costs, transitory downtime for the Singapore office leases and the weakened Australian dollar.”

For the quarter ended 31 December 2018, Suntec REIT reported that gross revenue improved 7.0% to S$93.5 million while NPI rose 2.3% to S$60.7 million. The higher NPI was mainly due to higher contribution from the REIT’s retail operations and 177 Pacific Highway. Yet, Suntec REIT’s DPU was down by 0.5% year-on-year to 2.59 cents.

As of 31 December 2018, the REIT’s gearing stood at 38.1% while its committed occupancy rate for its office and retail properties was 98.7% and 99.1%, respectively.

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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.