We’re into the third week of the second half of the year 2021. I certainly hope you’ve had a great first half of the year (personally, it was a really busy one for me, due to house moving – and in case you’re wondering, I’ve already shifted into my new place successfully at the end of May, as well as more or less gotten most of the unpacking and clearing up done, apart from some touching up works which I’m waiting for my ID to come and rectify.)

As we move into the month of July, it also means that another round of earnings season on its way – where companies will be publishing their business updates/financial results for the quarter ended 30 June 2021 in the coming weeks ahead.

Among the 15 companies in my long-term investment portfolio (you can check out a full list of all the companies I have invested in here), SPH REIT (SGX:SK6U) is the first one to strike the gong, where it reported its business updates for the third quarter of the financial year 2020/21 ended 31 May 2021 (the REIT has a financial year ending every 31 August 2021) after market hours yesterday (12 July 2021.)

In today’s post, I will be reviewing the REIT’s latest business updates – in terms of its financial performance, portfolio occupancy and debt profile, and its distribution per unit to unitholders.

Let’s begin…

Financial Performance

As the retail REIT have shifted to reporting its financial results on a half-yearly basis, this time round, they only provided a quick update on its gross revenue – which on a year-on-year (y-o-y) basis, it has improved by 22.2% to S$209.6m (9M FY2019/20: S$171.5m) due to a recovery in performance across all of its malls, as well as a reduction in rental reliefs to tenants (in both its Singapore and Australia malls.)

While the REIT did not provide its gross revenue for the third quarter, I did some calculations based on its year-to-date figures, along with the figures reported by the REIT for the first half of the year, and it is as follows:

	Q3 FY2019/20	Q3 FY2020/21	% Variance
Gross Revenue (S$’mil)	$38.1m	$69.6m	+82.8%

Personally, its not surprising that on a quarter-on-quarter (q-o-q) basis, the REIT’s gross revenue jumped by 82.8% because in the same time period last year (i.e. Q3 FY2019/20 between 01 March 2020 and 31 May 2020), Singapore’s retail industry was adversely affected by the Covid-19 pandemic, particularly by the Singapore government’s implementation of the ‘circuit breaker’ measures last year (between 07 April and 01 June 2020) to stop the further community spread of the virus – where the entire retail industry (except for those in essential business like F&B outlets and supermarkets) came to a complete standstill.

This is unlike for the current period under review (i.e. Q3 FY2020/21 between 01 March 2021 and 31 May 2021), where a huge majority of the retailers were able to resume their business operations (albeit with safe distancing measures) – hence the huge improvement in the REIT’s quarterly gross revenue.

Portfolio Occupancy Profile (Q2 FY2020/21 vs. Q3 FY2020/21)

Moving on, let us take a look at the REIT’s portfolio occupancy profile, where I will be looking at its portfolio occupancy profile recorded as at 31 May 2021, compared against that recorded 3 months ago (i.e. as at 28 February 2021), to find out whether or not it has improved, remained consistent, or deteriorated:

	Q2 FY2020/21	Q3 FY2020/21
Portfolio Occupancy (%)	98.0%	98.4%
Portfolio WALE (by NLA – in Years)	5.4 years	5.4 years
Portfolio WALE (by Gross Revenue – in Years)	3.0 years	3.0 years

It is good to note some slight improvements in the retail REIT’s portfolio occupancy rate – which can be attributed to an increase in the occupancy rate in Paragon (up from 97.1% in Q2 FY2020/21 to 97.3% in Q3 FY2020/21), as well as both of its malls in Australia – with the occupancy rate in Westfield Marion up from 97.9% in Q2 FY2020/21 to 98.5% in Q3 FY2020/21, and the occupancy rate of Figtree Grove up by 99.2% in Q2 FY2020/21 to 99.5% in Q3 FY2020/21.

Also, in terms of the REIT’s portfolio weighted average lease expiry, it has remained stable compared to the previous quarter.

Debt Profile (Q2 FY2020/21 vs. Q3 FY2020/21)

Just like how I have looked at the REIT’s portfolio occupancy profile in the previous section, in this section, I will be comparing its debt profile for the quarter under review (i.e. Q3 FY2020/21 ended 31 May 2021) against its debt profile for the previous quarter 3 months ago (i.e. FY2020/21 ended 28 February 2021):

	Q2 FY2020/21	Q3 FY2020/21
Average Term to Debt Maturity (in Years)	3.1 years	2.9 years
Average Cost of Debt (%)	1.84%	1.86%

In terms of its debt profile, it has more or less remained stable in my opinion. The REIT does not have any debt maturing in the remaining quarter of the current financial year.

Distribution Per Unit (Q3 FY2019/20 vs. Q3 FY2020/21)

SPH REIT declares a distribution to its unitholders on a quarterly basis. The following table is the REIT’s distribution per unit payout to its unitholders for the current quarter under review, compared against the same time period last year:

	Q2 FY2019/20	Q3 FY2020/21	% Variance
Distribution Per Unit (S$’cents/unit)	0.5 cents	1.38 cents	> 100.0%

The huge improvement in the REIT’s distribution payout compared to last year was because its distribution payout for the current quarter under review includes a 0.13 cents/unit of payout which was retained in the previous financial year (i.e. FY2019/20) as allowed under the Covid-19 relief measures announced by the IRAS.

If you are a unitholder of the retail REIT, here are its distribution dates to take note of:

Ex-date: 19 July 2021
Record Date: 21 July 2021
Payout Date: 25 August 2021

Closing Thoughts

Coming from a low base last year (particularly due to the ‘circuit breaker’, where the entire retail industry was adversely affected), it is of no surprise that the REIT reported a resilient set of results this year (as in the period under review, most of the retailers were able to resume their business operations.)

Its also encouraging to note that the occupancy rate for most of the REIT’s retail malls have improved compared to 3 months ago (in case you are wondering what’s the occupancy rate of The Clementi Mall and The Rail Mall, both of them are 100.0% occupied in the second, as well as in the third quarter of FY2020/21.) Also, its debt profile have remained stable.

As a unitholder of the REIT, I must say I’m pleased with the REIT’s latest “report card”, and I am positive of the REIT reporting an improved set of fourth quarter, and full-year results in October (provided the number of community cases remain under control, and there’s no further re-tightening of safe distancing measures imposed.)

With that, I have come to the end of my review of SPH REIT’s latest business update. Please note that everything you have just read here is for your educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. As always, you should always do your own due diligence before you make any investment decisions.

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

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