Following the end of the financial year 2020/21 on 31 August 2021, and also the release of its full year results in early October (you can check out the review I have written back when the REIT have released its results here), SPH REIT (SGX:SK6U) has published its latest annual report last Wednesday (27 October 2021), along with announcement of its upcoming AGM (more on that later in this post.)
For those of you who are not familiar with the retail REIT, here’s a brief introduction – the REIT (with its sponsor being SPH Limited) was listed on the Singapore Exchange since 24 July 2013, and its portfolio consists of 5 retail properties at the end of the latest financial year 2020/21 – 3 in Singapore (Paragon, The Clementi Mall, and The Rail Mall), and 2 in Australia (Westfield Marion Shopping Centre in Adelaide, and Figtree Grove Shopping Centre in New South Wales.)
I’ve invested in the REIT since 03 April 2020 (in case you’re wondering my average price, it was at $0.675), and as a unitholder, I’ve studied its latest annual report and in this post, you’ll find a summary of the salient points to take note of, along with details regarding its upcoming AGM, and my thoughts about the REIT’s latest year financial performance and outlook ahead:
- For the financial year under review, the improvements in its gross revenue (by 14.8% to $277.2m) and net property income (by 11.4% to $202.6m) can be attributed to the full-year contribution from Westfield Marion acquired in the previous financial year (on 06 December 2019.)
- Its distribution payout to unitholders also saw a 98.5% y-o-y jump to 5.40 cents/unit (FY2019/20: 2.72 cents/unit.) The huge difference was due to the management retaining a portion of distributable income for prudence in light of the worsening Covid-19 pandemic situation in the previous financial year. Also, the 5.40 cents/unit of distributable income for the current financial year is inclusive of a 0.52 cents/unit of income retained in the previous financial year.
Inclusion into the FTSE EPRA NAREIT Global Developed Index:
- The REIT was included into the FTSE EPRA NAREIT Global Developed Index in September 2021, which helped raise its visibility amongst global investors, and improving its trading liquidity. The management opined that the inclusion will strengthen the REIT’s position to capitalise on the upcoming economic recovery and capture attractive accretive growth opportunities.
SPH REIT’s Property Performance:
- In terms of individual property’s performance:
- Paragon – While it continues to be affected by the decline of tourist arrivals due to border restrictions, but compared to the previous financial year, tenant sales have largely stabilised, where it declined by only 1%. However, in terms of footfall to the mall, it fell by 17%;
- The Clementi Mall – The suburban mall continued to remain resilient, with its tenant sales seeing a 5% improvement compared to the previous financial year (despite its footfall falling by 33% in the same time period), due to the mall’s strategic location within a transport hub, densely populated Clementi Town, and its tactical partnerships wit the likes of Grab and FavePay;
- The Rail Mall – Its financial performance (with its gross revenue climbing from $3.9m in FY2019/20 to $4.4m in FY2020/21) continued to improve in the current financial year under review;
- Westfield Marion Shopping Centre – South Australia’s largest mall saw a 5% gain in terms of its tenant sales (compared to last financial year) as the area experienced a low incidence of Covid-19 cases. Footfall at the mall only fell by a modest 3% compared to the previous financial year;
- Figure Grove Shopping Centre – The extended lockdown in New South Wales in the financial year under review resulted in footfall to the mall declining by 3%, and tenant sales falling by 7%.
- The REIT’s top 10 tenants (Burberry Singapore, Club 21, Cold Storage Singapore, Cortina Watch, Ermenegildo Zegna, Far-East Ferragamo Singapore, Metro, Prada Singapore, Wesfarmers, Woolworths Group) contributed to 20.6% towards its rental income for the month of August 2021.
- As far as the REIT’s capital management is concerned, the management continues to adopt a prudent and disciplined approach in maintaining a healthy balance sheet as well as diversified sources of funding
- As at 31 August 2021, aggregate leverage was well maintained at 30.3%, its debt maturity profile was also well-staggered, with a weighted average term to maturity of 2.9 years. Its average cost of debt also fell to 1.84% (from 2.66% in FY2019/20) – with the improvements due to the overall decrease in interest rate environment, and the REIT have re-financed loans due in FY2020/21 at lower interest rates.
- In terms of the REIT’s debt maturity, 11.9% (or S$155m) of its borrowings will borrowings will be maturing in the coming FY2021/22 ahead.
- On the REIT’s sustainability efforts, the management have established the Sustainability Steering Committee (“SSC”) to drive and coordinate these efforts across the REIT. The REIT strives to be a good corporate citizen, and manage their business in a sustainable manner through mutually supportive engagements with their shoppers, employees, business partners, and the greater community while conducting their businesses with minimum impact to the environment.
- Finally, the management is of the view that even though there have been encouraging signs of improvement in their businesses, but they expect uncertainties and negative factors brought about by Covid-19 to continue to linger for some time.
- Moving into the new financial year, the management’s focus is on maintaining a high portfolio occupancy and at the same time, achieving a sustainable income level by working in partnership with their tenants while carefully managing their cost base.
Notice of AGM:
The REIT will be holding its AGM online on Wednesday, 24 November 2021, at 2.30pm, and you can sign up to attend the meeting, along with submitting any questions you may have for the management here – Do note that the deadline to do so will be on 21 November 2021, at 2.30pm.
As a unitholder of the REIT, I have already signed up to attend the meeting. For the benefit of those who aren’t able to do so, not to worry, as I will be uploading a summary of it in due course.
SPH REIT’s full-year results was a decent one, largely contributed by the fact that in the same time period last year, the REIT’s malls were negatively impacted by the lockdown measures as a result of the fast escalation in the number of Covid-19 community cases. However, in the current financial year under review, apart from its mall in New South Wales (due to movement restrictions implemented by the Australian government), all the other malls saw varying degrees of recovery (as most of the tenants have since resumed their operations as some of the safe management measures have been relaxed) – hence, the improvements in terms of the REIT’s financial performance.
Looking ahead, as to how much the REIT’s malls can further recover will largely depend on the situation of Covid-19 in Singapore, as well as in Australia – where its malls are located.
With that, I have come to the end of my post today on the summary of SPH REIT’s latest annual report (which I have compiled for the benefit of those who do not have time to go through it.) Before I end, a disclaimer that the contents above is not a recommendation to buy or sell units of the REIT. You should always do your due diligence before making any investment decisions.
Disclaimer: At the time of writing, I am a unitholder of SPH REIT.