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Acquisition-Led Growth for SPH REIT’s Second Quarter

SPH REIT (SGX: SK6U) is a retail real estate investment trust (REIT) with interests in Paragon, The Clementi Mall and The Rail Mall in Singapore. At the end of 2018, the REIT ventured into Australia by acquiring an 85% stake in Figtree Grove Shopping Centre, a freehold shopping mall in Wollongong, New South Wales, Australia.

On Friday, SPH REIT announced its financial results for the second quarter ended 28 February 2019 (2Q2019). Here’s a quick rundown on the financial figures from the latest quarter:

1. Gross revenue for 2Q2019 grew 8.5% to S$58.1 million, up from S$53.6 million last year. SPH REIT’s gross revenue improved for the quarter largely due to contributions from The Rail Mail and Figtree Grove Shopping Centre, which were added to the portfolio on 28 June 2018 and 21 December 2018 respectively.

2. Net property income (NPI), likewise, increased by 8.5% to S$45.9 million.

3. Distribution per unit (DPU) inched up by 0.7% to 1.41 Singapore cents, up from 1.40 Singapore cents a year back.

4. For the REIT’s first half period, gross revenue improved by 4.5% to S$111.9 million, NPI grew 3.8% to S$87.6 million while DPU went up by 0.4% to 2.75 Singapore cents.

5. As of 28 February 2018, the net asset value (NAV) per unit stood at S$0.94.

6. SPH REIT had a gearing ratio of 30.1% at the end of the reporting quarter. The figure rose from 26.3% at the end of August last year due to new loans taken up to finance the acquisition of Figtree Grove Shopping Centre. The average cost of debt was 2.88% per annum with the weighted average term to maturity at 2.1 years.

7. The following chart shows SPH REIT’s debt maturity profile, which is well spread out:

Source: SPH REIT 2Q2019 earnings presentation

8. Occupancy at SPH REIT’s properties remained high at 99.2% at the end of the second quarter. The overall portfolio registered a positive rental reversion of 8.4% for new and renewed leases, with Paragon achieving an 8.6% rental reversion. The REIT manager added that tenant sales as a whole have “continued to register growth”.

9. Tenant sales at Figtree Grove Shopping Centre were around 48% higher than the benchmark for malls in the same category. The shopping mall’s major anchor tenants include a 24-hour Kmart, Coles and Woolworths supermarkets. The mall’s committed occupancy stood at 99.3%.

10. SPH REIT has a right of first refusal on Singapore Press Holdings Limited’s (SGX: T39) The Seletar Mall property, which has maintained a high occupancy rate since its opening. Singapore Press Holdings is a sponsor of SPH REIT. The REIT manager is also exploring “acquisition opportunities that will add value to SPH REIT’s portfolio and improve returns to Unitholders”.

At SPH REIT’s current unit price of S$1.07, it has a price-to-book ratio of 1.1 and a distribution yield of 5.2%.

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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 Sudhan P doesn’t own shares in any companies mentioned.