Another round of earnings season has kickstarted once again – and just like in the previous quarters, I will be providing a summary of the updates posted by companies in my long-term investment portfolio (you can find out a list of all the companies I’ve invested in here), along with my personal thoughts.

SPH REIT (SGX:SK6U) was the first company in my long-term investment portfolio to post its business update for the first quarter of the financial year ended 30 November 2020, and in this post, you’ll find a summary of the most important points to take note of, along with my personal thoughts as an investor of the retail REIT to share…

Financial Performance (Q1 FY2019/20 vs. Q1 FY2020/21)

As the retail REIT have switched to half-yearly reporting, there was no detailed report on its financial performance for the quarter under review.

The only financial figure that the REIT reported was its gross revenue, which saw a 10.8% quarter-on-quarter (q-o-q) improvement to S$66.6m (Q1 FY2019/20: S$60.1m), largely attributed to Westfield Marion’s contribution of S$12.8m.

In terms of its gross revenue contribution by geographical location, SPH REIT’s malls in Singapore saw a 11.3% q-o-q decline to S$49.7m, largely due to rental reliefs granted to tenants which were significantly affected by Covid-19, while contributions from its malls in Australia went up due to contributions from Westfield Marion.

With regard to visitor footfall and tenant sales to the REIT’s retail malls, I note that its malls in Australia have saw a strong recovery to near the pre-Covid levels, which is encouraging to note. As for the REIT’s malls in Singapore, I understand that The Paragon continues to be impacted by border restrictions (the mall’s gross revenue dipped by 5.9% on a q-o-q basis from S$44.2m to S$38.5m), and The Clementi Mall being impacted by continued work-from-home arrangements (its gross revenue fell by 6.6% on a q-o-q basis from S$10.6m to S$9.9m.)

My Thoughts: With many countries suffering from yet another wave of the pandemic, I foresee Singapore’s immigration borders to continue to remain close to many countries in the near-term, and this will continue to negatively impact The Paragon’s visitor footfall and tenant sales (as the mall is quite reliant on tourist spending.)

As for The Clementi Mall, I personally feel that with the Chinese New Year festivities just round the corner, in the near-term, visitor footfall and tenant sales may see a boost as people head to the malls to shop for new clothings and new year goodies (just like in the previous years.) Also, should there be further loosening of restrictions, the mall will stand to benefit.

Debt Profile (Q1 FY2019/20 vs. Q1 FY2020/21)

The following table summarises SPH REIT’s debt profile on a q-o-q basis:

Q1 FY2019/20Q1 FY2020/21
Average Term to
Debt Maturity (years)
2.2 years2.7 years
Average Cost of
Debt (%)

My Thoughts: The REIT did not provide its gearing level as at the end of the first quarter on 30 November 2020. From the statistics they have reported, I did see some positives in that its average cost of debt have gone down by more than one percentage point, and correspondingly, the average term of to debt maturity have gone up.

Portfolio Occupancy Profile (Q1 FY2019/20 vs. Q1 FY2020/21)

Compared to the same time period last year (i.e. Q1 FY2019/20), the REIT’s overall portfolio occupancy rate saw a 1.4 percentage point decline to 97.9% (Q1 FY2019/20: 99.3%), which can be attributed to the fall in occupancy rate in The Paragon (from 99.8% in Q1 FY2019/20 to 98.0% in Q1 FY2020/21), as well as in The Clementi Mall (from 100.0% in Q1 FY2019/20 to 99.6% in Q1 FY2020/21.) However, The Rail Mall saw its occupancy rate climb from 89.5% in Q1 FY2019/20 to 100.0% in Q1 FY2020/21.

Another statistic to point out is its portfolio weighted average lease expiry by gross rental income, which remained stable at 2.6 years (Q1 FY2019/20: 2.6 years.)

Distribution Per Unit (Q1 FY2019/20 vs. Q1 FY2020/21)

On a q-o-q basis, its distribution per unit dropped by 13.0% to 1.20 cents/unit (Q1 FY2019/20: 1.38 cents/unit.)

If you are a unitholder of the REIT, the following are some of the important dates to take note of:

Ex-Date: 20 January 2021
Record Date: 21 January 2021
Payout Date: 26 February 2021

In Conclusion

No doubt The Paragon as well as The Clementi Mall have continued to suffer from a decline in its occupancy rate, as well as visitor footfall and tenant sales, but I confident of a recovery in the near-term for the latter as long as Singapore do not see a resurgence in the number of community cases of Covid-19 being reported, and the government continue to gradually loosen the restrictions. For the former (in The Paragon), my opinion is that it may take a longer time (of about a year or even more) to recover as the immigration borders continue to remain closed to many countries (and severe drop in tourists to Singapore will impacts footfall and tenant sales of The Paragon, which is reliant on tourists.)

As far as the other aspects about the REIT is concerned, I am happy with its latest set of business updates (particularly on its debt profile, and also the fact that its gross revenue have recorded an improvement on a q-o-q basis) and will continue to remain as a unitholder. However, despite having said that, this post is by no means a buy or sell recommendation for the REIT’s units. Please do your own due diligence before you make any investment decisions.

Related Documents

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

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