Soilbuild Business Space REIT (SGX: SV3U)'s DPU Jumped 19.8% In Q3



Soilbuild Business Space REIT (SGX: SV3U)'s 3Q20 DPU was up by 19.8% to 1.15 cents. It is trading at 7.3% dividend yield based on its last traded of $0.50 on 16th Oct.


Key Highlights:


  • Distribution per unit (DPU) and Dividend Yield (7.3%)

  • Price to book ratio (0.85)

  • Gearing (36.8%)

  • Portfolio Occupancy (92.9%)

  • Interest coverage ratio (4.4x)

  • Growth catalyst


Background of Soilbuild Business Space REIT


Soilbuild Business Space REIT manages 13 business space properties in Singapore and Australia. Four of those properties are business parks and the remaining 9 are industrial assets.


The sponsor of Soilbuild REIT is Lim Chap Huat and his immediate family members, who are holding a total of 29.6% of the REIT. The former is also the co-founder of Soilbuild Group and a controlling shareholder of Soilbuild Construction Group Ltd (SGX: S7P), which is a construction company.


1. Distribution per unit and dividend yield


Net property income jumped 16.5% to S$19.7m. This was mainly contributed by the new property, 25 Grenfell Street, reversal of rental waivers and and lower property taxes.


Based on its latest price, the REIT is currently trading at about 7.3% dividend yield. Historically, the REIT's DPU has been in the down trend in the past 6 years.


2. Price to book ratio


Over the past 6 years, Soildbuild Business Space REIT has been trading at an average price to book ratio of 0.94. Based on its last traded price, the REIT is currently trading at 0.85 price to book ratio, which is 10% cheaper as compared to its historical average.


3. Gearing


Portfolio leverage remains healthy at 36.8%, with a weighted debt maturity of 1.6 years. The REIT will not have any debt due for refinancing in 2020.

Soilbuild Business Space REIT's Debt Maturity


4. Portfolio Occupancy


Portfolio leverage remains high at 92.9%, with a weighted lease to expiry of 2.9 years. The REIT is in general maintaining a higher occupancy rate as compared to its market average.


5. Interest coverage ratio


Manulife US REIT has a low interest coverage ratio of 4.4 times, which is above our preference of 4 times. The REIT maintains an average interest cost of 3.19%, with 80.1% of its debt are on fixed rate.


6. Growth Catalyst


The REIT has a strong recovery in Q3 with cash flow improvement. The REIT manager expects to resume capital distribution relating to Australia-sourced income moving forward. The current focus of the REIT is to assist tenants during these challenging times and work towards to improve the portfolio strength through asset enhancement initiatives.


Summary


Soildbuild Business Space REIT has a good recovery in Q3. However, its 9M20 DPU was still down by 17.2%. As its DPU has not been very consistent over the years, we will remain the REIT in our watchlist at the moment.


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