In this post, I will be providing a summary of the latest financial results reported by companies in my long-term portfolio (you can check out my long-term portfolio here) for the quarter ended 31 December 2019, along with my personal thoughts about their latest results:

1. Ascendas REIT (SGX:A17U)

Since the REIT’s acquisition by CapitaLand Limited (SGX:C31), its financial year has been changed to 31 December (from 31 March.) As such, its latest year-end results (known as FY2019) only consists of results over a 9-month period (between 01 April and 31 December 2019.)

Because of that, it’s gross revenue, net property income, as well as total amount available for distribution fell. However, if we were to compare its performances over a 9-month period, you’ll see a much different story (for the previous financial year, its 9-month period is between 01 April to 31 December 2018, while for the current financial year, its 9-month period is between 01 April to 31 December 2019):

9M FY2018/19FY2019% Change
Gross Revenue
(S$’mil)
$661m$699m+5.7%
Net Property
Income
(S$’mil)
$486m$538m+10.7%
Total Amount
Available for
Distribution
(S$’mil)
$357m$375m+5.0%

As you can see from the table above, it’s top- and bottom-line saw improvements – the increase in its gross revenue was due to contribution from the 28 business park properties in the United States, and 2 business park properties in Singapore acquired in FY2019, while the jump in its net property income was in tandem with the increase in gross revenue and the adoption of FRS 116 since 01 April 2019.

Portfolio Occupancy Profile:

The following table illustrates Ascendas REIT’s portfolio occupancy profile at the end of the current financial year under review (i.e. FY2019) and at the end of the previous financial year (i.e. FY2018/19):

FY2018/19FY2019
Occupancy Rate
(%)
91.9%90.9%
Weighted Average
Lease Expiry
(by Gross Revenue
– in Years)
4.2 years3.9 years
Rental Reversion
(%)
+3.7%+6.0%

I’m happy to note that its occupancy rate has remained at above 90.0%, along with the increase in rental reversions (to +6.0% in the current financial year under review.)

However, for the latter, I note from the REIT’s presentation (of its 4th quarter and full-year results) that they expect it to be a low single-digit improvement in the upcoming FY2020 in view of the current global uncertainty.

Debt Profile:

Just like its portfolio occupancy profile, I will be comparing the REIT’s debt profile for the current financial year under review (i.e. FY2019) against the previous financial year (i.e. FY2018/19):

FY2018/19FY2019
Gearing Ratio
(%)
36.3%35.1%
Interest Coverage
Ratio (times)
5.2x5.1x
Average Term to
Debt Maturity
(years)
4.0 years4.0 years
Average Cost
of Debt (%)
3.0%2.9%

Overall, its debt profile have remained pretty much stable in my opinion. With the REIT’s gearing ratio at 35.1% at the end of FY2019, there is plenty of headroom for the REIT to make further yield accretive acquisitions before its gearing ratio reaches the regulatory limit of 45.0%.

Distributions Declared for Unitholders:

The REIT’s management declares a distribution payout to unitholders on a half-yearly basis – once when they release their half-year results, and another when they release their full-year results.

With that, the following is the REIT’s distribution payout for the current and previous financial year:

FY2018/19FY2019% Change
Distribution
Per Unit
(S$’cents)
16.035
cents
11.490
cents
-28.3%

The year-on-year drop in its distributions per unit was due to an enlarged unit base for the rights issue done in November 2019.

2. OCBC Corporation Limited (SGX:O39)

OCBC reported its fourth quarter and full-year financial results for FY2019 ended 31 December 2019. Let us have a look at some of the key financial figures:

FY2018FY2019% Change
(i) Net Interest
Income (S$’mil)
$5,890m$6,331m+7.5%
(ii) Net Fee &
Commission Income
(S$’mil)
$2,031m$2,123m+4.5%
(iii) Other Non-
Interest Income
(S$’mil)
$1,780m$2,417m+35.8%
Total Income
(S$’mil)
$9,701m$10,871m+12.1%
Net Profit
(S$’mil)
$4,675m$5,022m+7.4%
Net Profit
Attributable to
Shareholders
(S$’mil)
$4,492m$4,972m+10.7%

Total income constitutes of (i) net interest income, (ii) net fee and commission income, as well as (iii) other non-interest income.

As you can see from the above, all of the financial figures reported improvements on a year-on-year basis.

Key Financial Ratios:

The following are some of the key financial figures of the bank, where I compare figures for the current financial year (i.e. FY2019) against the previous (i.e. FY2018):

FY2018FY2019Change
(in percentage

points – pp)
Net Interest
Margin (%)
1.70%1.77%+0.07pp
Return on
Assets (%)
1.17%1.26%+0.09pp
Return on
Equity (%)
10.7%10.5%-0.02pp
Non-Performing
Loans Rate (%)
1.5%1.5%

Other than a slight dip in its return on equity, all the other key financial ratios saw year-on-year improvements.

Dividend Payouts to Shareholders:

OCBC pays out a dividend to shareholders on a half-yearly basis – once when they release their half-year results (known as interim dividend), and once when they release their full-year results (known as final dividend.)

Compared to last year, OCBC hiked both its interim (to 25.0 cents from 20.0 cents) as well as final (to 28.0 cents from 23.0 cents) dividend.

As such, its total dividend payouts, along with its payout ratio which I have computed based on its closing share price on the last trading day of the respective financial years are as follows:

FY2018FY2019% Change
Dividend Per
Share
(S$’cents)
43.0 cents53.0 cents+23.3%
Dividend Payout
Ratio (%)
40.5%47.5%

Looking at the dividend payout ratios for the 2 financial years above, personally, I feel there is more room for the management fo further increase their dividend payouts in the coming financial years ahead.

Comparison of the 3 Banks’ Latest Financial Results:

I have done a comparison of the 3 Singapore banks’ latest financial results recently and you can check it out here.

3. EC World REIT (SGX:BWCU)

EC World REIT reported its fourth quarter and full-year results for the financial year 2019 ended 31 December 2019, and the following are some of the key financial figures to highlight (FY2018 vs. FY2019):

FY2018FY2019% Change
Gross Revenue
(S$’mil)
$96m$99m+3.0%
Net Property
Income (S$’mil)
$87m$90m+3.4%
Total Amount
Available for
Distribution
(S$’mil)
$49m$48m-2.0%

The REIT’s gross revenue and net property income saw year-on-year improvements due to contributions from Fuzhou E-commerce (which was acquired in April 2019), along with built-in rental escalations in master lease agreements.

However, its total amount available for distribution to unitholders went down by 2.0% due to the management retaining 5.0% of the distributable income for general working purposes and for “unforeseen contingencies.” The REIT’s management also updated that as the REIT’s properties caters largely to the e-commerce and specialised logistics sector, it is less exposed to the Covid-19 situation compared to businesses with operations that rely larely on human traffic.

For those of you who are wondering my thoughts about the management retaining 5.0% of the distributable income for the current financial year, my take is this – In light of the current Covid-19 situastion, I think this is reasonable and putting myself in the shoes of the management, I would have done the same as well.

Portfolio Occupancy Profile:

FY2018FY2019
Occupancy Rate (%)99.2%99.97%
Weighted Average Lease
Expiry (by Gross Rental
Income – in Years)
2.0
years
4.1
years

It is good to see that both the REIT’s occupancy rate and weighted average lease expiry (by gross rental income) both recorded year-on-year improvements.

Debt Profile:

FY2018FY2019
Gearing Ratio (%)31.5%38.7%
Average Cost of
Debt (%)
4.3%4.5%

On a year-on-year basis, the REIT’s gearing ratio have went up by 7.2 percentage points to 38.7% for the latest financial year under review. From my understanding, this was due to the REIT’s acquisition of Fuzhou E-commerce in August 2019.

At 38.7%, its gearing ratio is inching towards the regulatory limit of 45.0%, meaning its available debt headroom to make further yield-accretive acquisitions is much reduced. I will be monitoring its gearing ratio in its upcoming results release.

Distribution to Unitholders:

The management currently declares a distribution to unitholders on a quarterly basis. However, I understand from its latest results release that the management is considering to switching to paying distributions to unitholders on a semi-annual basis. I await for further announcements about this.

Meanwhile, its annualised distribution to unitholders for the current financial year under review (i.e. FY2019), compared against the previous year (i.e. FY2018) is as follows:

FY2018FY2019% Change
Distribution Per
Unit (S$’cents)
6.179
cents
6.047
cents
-2.1%

In-line with the drop with the total amount available for distribution to unitholders (discussed above), its distribution per unit was down 2.1% on a year-on-year basis to 6.047 cents/unit.

4. Hong Leong Finance (SGX:S41)

Finally, Hong Leong Finance also reported its full-year results for FY2019 which ended 31 December 2019:

FY2018FY2019% Change
(i) Net Interest
Income / Hiring
Charges (S$’000)
$212,119k$201,704k-4.9%
(ii) Fee & Commission
Income (S$’000)
$15,337k$13,714k-10.6%
(iii) Other Operating
Income (S$’000)
$614k$324k-47.2%
Total Income
(S$’000)
$228,070k$215,742k-5.4%
Net Profit
(S$’000)
$118,343k$103,085k-12.9%

Hong Leong Finance’s total income consists of (i) net interest income/hiring charges, (ii) fee and commission income, and (iii) other operating income. Looking at the table above, it is a weakened set of results reported by the financial institution for FY2019.

While its interest income grew by 13.3% on a year-on-year basis to S$396m due to healthy loan growth and improved loan yields of 16 basis points, its interest expense increased to S$194.7m in the same time period driven by competitive deposit rates on enlarged deposit base to support loan growth.

Its fee and commission income declined 10.6% on a year-on-year basis due to lower fee income earned from lending activities. Finally, its other operating income saw a year-on-year decline of 47.2% due to the absence of a gain on the disposal of plant and equipment in the previous financial year.

Last but not least, the reason for the Group’s 12.7% year-on-year drop in its net profits was due to the net loss of allowances of doubtful debts amounting to S$1.6m against net recoveries of S$2.2m in FY2018.

My personal opinion about its latest set of financial results is this – If the slump is just a “one-off”, I will not be too concerned about it. However, should the financial results continue to slump in the quarters ahead, I may re-consider my position in the company.

Dividend Payouts to Shareholders:

Hong Leong Finance declares a dividend payout to shareholders on a half-yearly basis – once when it announces its second quarter results and once when it announces its fourth quarter results.

While the Group reported a weaker set of results on a year-on-year basis, they maintained their final dividend payout of 10.0 cents/share (which is the same as the same quarter last year.)

The following table is the Group’s total dividend payout to shareholders in the current financial year (i.e. FY2019) compared to the previous financial year (i.e. FY2018), along with its payout ratio:

FY2018FY2019
Dividend Per Share
(S$’cents)
15.0 cents15.0 cents
Dividend Payout
Ratio (%)
56.6%65.1%

Looking at its dividend payout ratio over the 2 financial years above, personally, I feel that the Group should still be able to maintain its current dividend payout at 15.0 cents/share in the coming financial year ahead.

Addition of 3 REITs to My Personal Long-Term Portfolio

On 28 February 2020, I have added 3 new REITs to my portfolio, and they are:

1. Suntec REIT (SGX:T82U) at S$1.75. Based on its total distribution of 9.507 cents/unit in FY2019, it represents a yield of 5.4%

2. CapitaLand Mall Trust (SGX:C38U) at S$2.32. Based on its total distribution of 11.970 cents/unit in FY2019, it represents a yield of 5.2%

3. Mapletree North Asia Commercial Trust (SGX:RW0U) at S$1.07. Based on its total distribution of 7.690 cents/unit in FY2019, it represents a yield of 7.2%

All the above 3 REITs declares a distribution payout to unitholders on a quarterly basis. I will be sharing more about my investment decisions on each of the 3 REITs in due course, so keep a lookout for it! 🙂

 

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