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2 Singapore 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 Soilbuild Business Space REIT (SGX: SV3U). As a quick introduction, Soilbuild Business Space REIT invests primarily in business parks and industrial properties in Singapore and Australia.

In its latest quarterly earnings update, Soilbuild Business Space REIT announced that gross revenue grew by 16.6% year-on-year to S$22.7 million while net property income (NPI) improved by 7.7% to S$18.3 million. The higher NPI was mainly due to 1) the conversion of Solaris into a multi-tenanted property; and 2) contribution from two Australia properties. Yet, distribution per unit (DPU) felll 9.5% to 1.198 cents due to operating expenses growing faster than NPI.

Roy Teo, CEO of the REIT’s Manager, commented:

“We have announced the proposed divestment of 72 Loyang Way as part of our capital recycling efforts and are pleased to have waived the manager’s divestment fee for this DPU-accretive divestment. We have also demonstrated proactive capital management by refinancing two loans ahead of maturity in 1QFY2019 and now have no refinancing requirement until FY2021. Our focus in FY2019 will be to enhance our operational performance and prudently evaluate further growth opportunities in Australia to achieve sustainable returns for our Unitholders.”

As of 31 March 2019, the REIT’s gearing stood at 39.3%, which is a safe distance from the regulatory ceiling of 45%.

The next REIT on the list is Keppel REIT (SGX: K71U). As a quick introduction, Keppel REIT focuses on commercial properties in Singapore and Australia.

For the quarter ended 31 March 2019, Keppel REIT reported that property income improved 0.7% year-on-year to S$40.0 million while NPI grew by 0.3% during the period to S$31.3 million. Yet, DPU was down by 2.1% as compared to the same period last year to 1.39 cents. The weaker DPU was due to impact from occupancy changes, weaker Australian dollar, and lower income contribution from Ocean Financial Centre following the divestment of a 20% stake in 2018.

In terms of outlook, here’s what the company said in its press release:

“Amidst the uncertain macro‐economic environment, the Manager remains focused on delivering stable and sustainable distributions to Unitholders, and on achieving long‐term growth. The Manager will seek to continue its ongoing portfolio optimisation, while driving operational excellence in its asset and capital management efforts. “

As of 31 March 2019, the REIT’s gearing and occupancy ratios stood at 35.7% and 98.7%, 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.