With a financial year-end on 31 August 2020, SPH REIT (SGX:SK6U) published its annual report for the financial year 2019/20 last Wednesday (04 November 2020.)

As a unitholder of the retail REIT (it is in my long-term investment portfolio), I have gone through the report, took notes of the most important aspects to take note of, and in this post, I will be sharing them here…

Summary of Statement by Chairman Dr Leong Horn Kee and CEO Ms Susan Leng Mee Yin

  • FY2019/20 was a tale of two halves, where the REIT has a positive set of results in the first half of the financial year (between 01 September 2019 and 29 February 2020), and for the second half of the financial year (between 01 March and 31 August 2020), its financial results was severely impacted by the ongoing Covid-19 pandemic.
  • As far as the retail properties in its portfolio (which maintained a strong occupancy rate of 97.7%, and a rental reversion of +5.9% as at 31 August 2020) are concerned, on a year-on-year (y-o-y) basis:
    • Paragon (in Singapore), which was impacted by border restrictions, registered a 28.3% decline in tenant sales (to S$507.8m), while footfall declined by 27.4% to 13.8m.
    • The Clementi Mall (in Singapore) was impacted by work from home arrangements, with its tenant sales falling by 12.7% to S$20.6m, and its footfall declined by 27.8% to 22.8m.
    • Westfield Marion (a freehold shopping centre in Adelaide, South Australia, which the REIT has a 50.0% stake in) saw its tenant sales drop by 9.1% to AUD690.6m, and its footfall falling by 11.2% to 11.9m.
    • Figtree Grove Shopping Centre (an established freehold sub-regional shopping centre in Wollongong, New South Wales, Australia, which the REIT has a 85.0% stake in), maintained a footfall of 4.6m (supported by the residential catchment in the suburbs of Wollongong), with its tenant sales edging down 1.1% to AUD184.7m.
  • In terms of the REIT’s financial performance:
    • Gross revenue went up by 5.6% on a y-o-y basis to S$241.5m (FY2018/19: S$228.6m) due to contributions from the newly acquired Westfield Marion (in December 2019, and it contributed S$37.5m for 3 quarters in the current financial year under review), as well as Figtree Grove (acquired in December 2018, and it contributed S$15.9m towards the REIT’s full-year income this financial year), offset by S$31.8m of rental waivers and reliefs provided to tenants in Singapore.
    • Property operating expenses was up by 21.8% to S$59.5m (FY2018/19: S$48.9m) mainly due to operating costs from the newly acquired Westfield Marion.
    • Net property income inched up by 1.2% to S$181.9m (FY2018/19: S$179.8m.)
  • SPH REIT’s gearing ratio remains stable at 30.5%, with no refinancing due till June 2021.
  • Finally, the management is of the opinion that Covid-19’s impact is continued to continue into FY2020/21, and as such, their near-term focus is to minimise vacancies to provide a sustainable rental income by working hard with their tenants, while at the same time carefully managing costs.

SPH REIT’s Property Portfolio Profile

  • Portfolio Occupancy (FY2018/19 vs. FY2019/20):
    • Paragon – 99.8% vs. 97.8%
    • The Clementi Mall – 100.0% vs. 99.6%
    • The Rail Mall – 84.3% vs. 92.2%
    • Westfield Marion – 98.2% vs. 97.4%
    • Figtree Grove – 99.2% vs. 99.2%
  • Portfolio Lease Expiry (by gross rental income):
    • 2020: 0%
    • 2021: 25%
    • 2022: 23%
    • 2023: 26%
    • 2024 and beyond: 26%
  • Top 10 tenants accounted for 19.6% towards the REIT’s overall rental income

Debt Maturity Profile of SPH REIT

  • Key Indicators (FY2018/19 vs. FY2019/20):
    • Gearing ratio: 27.5% vs. 30.5%
    • Interest coverage ratio: 5.3x vs. 4.7x
    • Weighted average term to debt maturity: 2.5 years vs. 2.9 years
    • Annualised average all-in interest rate: 2.91% vs. 2.66%
    • Percentage of fixed loan: 65.9% vs. 45.7%
  • Debt maturity profile:
    • 16.5% (or S$215m) of total debt expiring in 2021
    • 18.5% (or S$240m) of total debt expiring in 2022
    • 25.4% (or S$330m) of total debt expiring in 2023
    • 39.6% (or S$515m) of total debt expiring in 2024 and beyond

Notice of Annual General Meeting (AGM)

In light of the ongoing Covid-19 pandemic, and safe distancing measures currently in place, the REIT will be holding its upcoming AGM online on Thursday, 26 November 2020, at 2.30pm.

If you are a unitholder of the retail REIT and would like to attend the upcoming AGM, you can register via the following link (deadline to do so will be on 23 November 2020, at 2.30pm):

https://online.meetings.vision/sphreit-agm

I have already signed up to attend the meeting as a unitholder and will be providing a summary of it in due course (for the benefit of those who aren’t able to attend the meeting.)

My Thoughts

Personally, I felt that as far as the REIT’s full-year results, portfolio occupancy and debt profile are concerned, they remain resilient.

Moving forward, with Singapore gradually opening up its immigration borders to allow foreign tourists to visit the country once again, I am of the opinion that the performance of the retail REIT should improve in the quarters ahead (albeit a slow one.) With regard to its distribution payout to unitholders is concerned, I personally think that the REIT may continue to withhold a certain amount of distributable income in the financial year ahead for prudence (in case there is a second wave of the outbreak in Singapore and some of the measures need to be re-implemented, which will definitely impact the retail REIT’s performance.)

Related Documents

Disclaimer: At the time of writing, I am a unitholder of SPH REIT.

 

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