The first quarter of calendar year 2020 is coming to an end – and what this means if you are a retail investor is that, another round of earnings season is about to begin, where most companies will be reporting an update for the first quarter.

On Monday evening (29 March 2021), SPH REIT (SGX:SK6U), with properties in Singapore (namely Paragon, The Clementi Mall, and The Rail Mall) and in Australia (a 85.0% stake in Figtree Grove Shopping Centre, as well as a 50.0% stake in Westfield Marion Shopping Centre) reported its second quarter results for the financial year 2020/21 ended 28 February 2021.

In this post, you will find my review about the retail REIT’s financial performance, debt and portfolio occupancy profile, as well as its distribution payouts to unitholders.

Let’s begin…

Financial Performance (1H FY2019/20 vs. 1H FY2020/21)

As the REIT did not provide an update on its financial performance in the first quarter of the financial year, in this section, we can only look at and compare its half-yearly results for the current financial year (i.e. 1H FY2020/21) against that reported a year ago (i.e. 1H FY2019/20):

1H FY2019/201H FY2020/21% Variation
Gross Revenue
(S$’mil)		$133.4m$140.0m+4.9%
Property Operating
Expenses (S$’mil)		$29.9m$35.1m+17.4%
Net Property
Income (S$’mil)		$103.5m$104.9m+1.3%
Distributable
Income to
Unitholders (S$’mil)		$44.1m$67.8m+53.5%

Overall, it was a set of improved results reported by the retail REIT – its 4.9% year-on-year (y-o-y) growth in its gross revenue was due to contribution (of S$26.4m) from its newly acquired Westfield Marion Shopping Centre (in December 2019.)

The 17.4% y-o-y increase in its property operating expenses was largely attributed to the acquisition of Westfield Marion.

Finally, the REIT’s distributable income to unitholders skyrocketed by 53.5% to S$67.8m.

My Thoughts: As a unitholder, I am encouraged to see an improved set of results like the one above.

Debt Profile (Q1 FY2020/21 vs. Q2 FY2020/21)

In this section, let us take a look at the REIT’s debt profile recorded for the current quarter under review (i.e. for Q2 FY2020/21 ended 28 February 2021), compared against its debt profile recorded 3 months ago (i.e. Q1 FY2020/21 ended 30 November 2020) to find out if it has improved or deteriorated:

Q1 FY2020/21Q2 FY2020/21
Aggregate Leverage
(%)		– *30.4%
Average Term to Debt
Maturity (in Years)		2.7 years3.1 years
Average Cost of
Debt (%)		1.82%1.84%

* – the REIT did not provide its aggregate leverage when it provided its business updates for the first quarter of FY2020/21.

My Thoughts: Personally, I felt that the REIT’s debt profile have remained stable (no doubt its average cost of debt have increased slightly compared to the previous quarter, but there is no cause for concern as the increase is minimal in my opinion.) In terms of debt expiration, there are no debt expiring in 2021.

Another thing I’d like to highlight is its aggregate level, where, at 30.4%, is a good distance away from the regulatory limit of 50.0%, and this provides the REIT plenty of debt headroom to make further yield-accretive acquisitions.

Portfolio Occupancy (Q1 FY2020/21 vs. Q2 FY2020/21)

Next, let us take a look at the REIT’s portfolio occupancy profile – and just like how I looked at its debt profile in the previous section, I will be comparing statistics reported for the current quarter under review (i.e. Q2 FY2020/21) against that reported in the previous quarter three months ago (i.e. Q1 FY2020/21):

Q1 FY2020/21Q2 FY2020/21
Portfolio Occupancy
(%)		97.9%98.0%
Portfolio Weighted
Average Lease Expiry
(by Net Lettable
Area – in Years)		5.5 years5.4 years
Portfolio Weighted
Average Lease Expiry
(by Gross Rental
Income – in Years)		2.6 years3.0 years

My Thoughts: Similar to its debt profile, SPH REIT’s portfolio occupancy profile continued to remain stable as well.

In terms of rental reversion, apart from The Clementi Mall (which had a rental reversion of -7.8%), both the Paragon and The Rail Mall had positive rental reversions – with the former at +1.3%, and the latter at +5.4%.

Tenant sales at the REIT’s Singapore malls, from my understanding in the REIT’s update, showed signs of recovery following the phased lifting of the safe distancing measures.

Distribution Payout to Unitholders (Q2 FY2019/20 vs. Q2 FY2020/21)

SPH REIT continues to declare a distribution payout to its unitholders on a quarterly basis. Let us take a look at the payout declared for the current quarter under review, compared to the same time period last year (i.e. Q2 FY2019/20 ended 28 February 2020) in the table below:

Q2 FY2019/20Q2 FY2020/21% Variation
Distribution Per
Unit (S$’cents)		0.3 cents1.24 cents> 100%

From my understanding, the REIT manager retained a total of 0.52 cents/unit last year, which it had been paying out gradually. For the current quarter under review, 0.13 cents/unit was included in its second quarter payout. The remaining 0.26 cents/unit that was retained will be paid out in the remainder of the financial year, assuming there are no changes in the REIT’s unit base.

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

Ex-Date: 06 April 2021
Record Date: 07 April 2021
Payout Date: 11 May 2021

In Conclusion

SPH REIT’s latest set of results was, in my opinion, a resilient one.

With Singapore gradually relaxing its safe distancing measures, coupled with ongoing discussions for travel bubbles with other countries (where their community cases of new Covid-19 infections continue to remain low) to be formed, it will lead to a further recovery for the retail malls ahead – especially The Paragon in Orchard, should tourists are able to visit Singapore once again.

As such, I am confident of the retail REIT’s further recovery in the coming quarters ahead.

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

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