SPH REIT (SGX:SK6U)'s Full Year DPU Dropped 54% Due To Rental Waiver



SPH REIT (SGX:SK6U)'s full year DPU was down 54% to 2.72¢. It is currently trading at 3.2% yield based on the last traded share price of $0.86 on 7 Oct.


Key Highlights:


  • Distribution per unit (DPU) and Dividend Yield (3.2%)

  • Price to book ratio (0.95)

  • Gearing (30.5%)

  • Interest coverage ratio (4.7x)

  • Portfolio occupancy rate (97.8%)

  • Growth catalyst


Background of SPH REIT


SPH REIT is a REIT that manages retail properties in the Asia-Pacific region. Currently, its portfolio consists of five assets in Singapore (Paragon, The Clementi Mall and The Rail Mall) and Australia (Figtree Grove Shopping Centre and Westfield Marion Shopping Centre). 


SPH REIT’s sponsor is Singapore Press Holdings Limited (SGX: T39) which has a 69.8% interest in SPH REIT.



1. Distribution per unit and dividend yield


In its 2H 2020 result, SPH REIT's net property income dropped 14.9% to S$78.4m. This was partly due to the $31.8m rental waivers and relief to its Singapore tenants during this Covid-19 period. Based on its latest price, the REIT is currently trading at about 3.2% dividend yield. Before the recent sharp drop in DPU due to Covid-19, the REIT has been maintaining very consistent DPU over the years.




2. Price to book ratio


The REIT is currently trading at a price to book ratio of 0.95, which is below its 5-year average of 1.07, indicating a 10% discount based on its historical average.


3. Gearing


Portfolio leverage increased to 30.5%. The average debt tenor maintained at 2.9 years. The REIT will have no refinancing required until next year. Its debt maturity is well spread in the next 5 years.


4. Interest coverage ratio


The REIT has a healthy interest coverage ratio of 4.7 times, which is above our preference of 4 times. Besides, the REIT maintains a low overall interest cost of 2.66%.


5. Portfolio occupancy rate


Portfolio occupancy remains at a high occupancy rate of 97.7%. The REIT has built a resilient portfolio with a mixture of retail malls in the prime district and suburban area.

Portfolio Occupancy (Source: SPH REIT's Presentation Slide)

6. Growth Catalyst


Despite Covid-19 headwinds, the manager expects its assets to remain resilient though various proactive measures to assist the affected tenants. Besides, with its strong balance sheet, the management continues to look for acquisition opportunities to grow its portfolio.


Summary


Overall, SPH REIT continues to deliver strong results. Excluding the one-off rental waivers during the pandemic period, the REIT is trading at 6.2% yield. As Singapore is looking to move to Phase 3 re-opening, we should continue to see recovery on the shopper traffic.



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