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10 Things Investors Should Know About BHG Retail REIT’s Latest Earnings Update

On Tuesday, BHG Retail REIT (SGX: BMGU) announced its 2018 full-year result. BHG Retail REIT is a real estate investment trust that focuses on retail malls in China, and it currently has a portfolio of five malls. Its sponsor is the China-listed Beijing Hualian Department Store Co. Ltd, which is part of the Beijing Hualian Group, one of China’s largest retail operators.

Let’s look at 10 important things from the company’s earnings announcement that investors should know:

  1. Full-year gross revenue grew 8.0% year on year to S$69.7 million, while net property income (NPI) improved by 6.3% to S$45.6 million.
  2. Yet, distribution per unit (DPU) declined 5.7% year on year to 5.16 Singapore cents.
  3. Gearing as of 31 December 2018 stood at 30.7%. 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 98.7% 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), come from tenants in the experiential segments.
  7. Based on BHG REIT’s full-year DPU of 5.16 Singapore cents and its unit price of S$0.70 (as of writing), the REIT has a trailing distribution yield of 7.4%.
  8. China’s economy grew by 6.6% year on year in 2018, while its retail sales growth was up 9.0% year on year in that period.
  9. Disposable income and expenditure per capita for urban residents in China increased by 7.8% and 6.8%, respectively, in 2018.
  10. Chan Iz-Lynn, chief executive officer of BHG REIT’s manager, commented:

“Gross revenue and net property income (“NPI”) for FY 2018 grew 8.0% and 6.3% respectively year-on-year. Based on the closing price of S$0.715 as at 31 December 2018, and aggregated distribution per unit (“DPU”) for FY 2018 of 5.16 Singapore cents, BHG Retail REIT’s annual distribution yield of 7.2%1 continues to represent an attractive long-term yield-play investment.

At the property level, our malls continued to exhibit healthy leasing demands. Portfolio committed occupancy rate was 98.7% as at 31 December 2018. Rents for new and renewed leases continued to achieve very healthy rental reversions for new and renewed leases, as well as in-built rental escalation for ongoing tenancies. This was achieved through dedicated efforts to continually enhance the quality and popularity of our malls and to entrench our malls as the mall of choice for tenants and the surrounding communities.”

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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.