Sabana Shari'ah REIT’s DPU Affected By Portfolio Occupancy




Key Highlights:

  • Sabana REIT's (SGX:M1GU) 3Q19 DPU was up 1.3% to 0.78 cents

  • The annualised yield and price to book ratio are 6.8% and 0.81 respectively



1. Dividends


Net property income grew 10.1% to $13.9m. The increase was mainly due to

  • higher contributions from its multi-tenanted properties

  • one-off rental recovery from tenants of 2 Toh Tuck Link and 151 Lorong Chuan

  • lower property expenses

  • divestment of 9 Tai Seng Drive

However, the increase in income was partially offset by lower occupancy in other properties.


The annualised yield is 6.8%.



2. Portfolio


Portfolio occupancy went down to 80.6%, and 39.7% of the leases will expire next year. The portfolio leverage ratio remains stable at 30.8% with an average interest cost of 4.1%. It is currently trading at a price to book ratio of 0.81. Due to the trade war and slow down in economy, the portfolio occupancy is likely to be impacted in the next few quarters. With the master lease expiring in end-2019, the property income could be affected next year.

3. Growth catalyst


Moving forward, the REIT manager expected that the rental reversion for 2019 and 2020 is likely to be negative. The multi-tenanted light industrial and warehouses segment is likely to be impacted by the slow down in economy.

The management is actively engaging potential tenants to take over the master lease, which is expiring in end-2019. Besides, the REIT continues to execute Phase 2 of its asset enhancement strategy for portfolio growth.

Summary


With its historical dividend performance, Sabana REIT does not match our criteria to be included in our REIT portfolio.


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