After market hours last Friday (01 April 2022), SPH REIT, with retail properties in Singapore (Paragon, The Clementi Mall, and The Rail Mall) and Australia (85% stake in Figtree Grove Shopping Centre, and a 50% stake in Westfield Marion Shopping Centre), released its financial results for the first half of the financial year 2021/22 ended 28 February 2022.

As a unitholder of the retail REIT, I have studied its latest set of results (in terms of its financial performance, portfolio occupancy and debt profile, along with its distribution payout to unitholders – for information, the REIT is one of the few that continues to declare a distribution payout to its unitholders on a quarterly basis), and in this post, you’ll find more details about them, along with my personal thoughts to share (my apologies for the slightly later update, as I wasn’t feeling too well the past couple of days.)

Let’s begin:

Financial Performance (1H FY2020/21 vs. 1H FY2021/22)

The following table is SPH REIT’s financial performance for the first half of the current financial year, compared against the same time period last year:

1H FY2020/211H FY2021/22% Variance
Gross Revenue
(S$’mil)
$140.0m$141.6m+1.2%
Property Operating
Expenses (S$’mil)
$35.1m$36.4m+3.6%
Net Property
Income (S$’mil)
$104.9m$105.3m+0.4%
Distributable Income
to Unitholders
(S$’mil)
$67.8m$75.1m+10.8%

In my opinion, its latest financial performance was a muted one in my opinion – where its gross revenue edged up by just 1.2%, mainly due to lower rental waivers and reliefs granted to eligible tenants.

Also, due to an increase in its property operating expenses (mainly due to a spike in electricity rates), its net property income only edged up 0.4%.

Portfolio Occupancy Profile (Q1 FY2021/22 vs. Q2 FY2021/22)

Moving on, let us take a look at the retail REIT’s portfolio occupancy profile – where I will be comparing the statistics reported for the current quarter under review (i.e. Q2 FY2021/22 ended 28 February 2022) against that recorded in the previous quarter 3 months ago (i.e. Q1 FY2021/22 ended 30 November 2021) to find out if it has improved, deteriorated, or remained largely the same:

Q1 FY2021/22Q2 FY2021/22
Portfolio Occupancy
(%)
98.8%98.4%
Portfolio WALE (by
NLA – in Years)
5.5 years5.4 years
Portfolio WALE (by
GRI – in Years)
2.9 years2.8 years

My Observations: Even though the statistics have edged down slightly compared to the previous quarter – particularly, the 0.4 percentage point (pp) dip in the portfolio occupancy rate was due to a drop in occupancy rate in Paragon (from 99.7% in Q1 FY2021/22 to 98.8% in Q2 FY2021/22), Westfield Marion (from 98.0% in Q1 FY2021/22 to 98.0% in Q2 FY2021/22), and also in Figtree Grove (from 99.1% in Q1 FY2021/22 to 99.0% in Q2 FY2021/22.)

That said, however, I still feel that on the whole, the occupancy rate of the REIT’s properties continue to be very healthy, and as such, no cause for concern for me.

As far as lease expiries for the 2nd half of the current financial year is concerned, just 8% (in terms of its total net lettable area, or NLA), and 6% (in terms of its gross rental income, or GRI) of the lesses are due for renewal – quite minimal in my opinion.

Debt Profile (Q4 FY2020/21 vs. Q2 FY2021/22)

As the REIT did not provide any information about its aggregate leverage (or gearing level) for the first quarter of the financial year, I will be reviewing its debt profile recorded for the current quarter under review (i.e. Q2 FY2021/22 ended 28 February 2022) against that reported for the fourth quarter of the financial year FY2020/21 ended 31 August 2021 to find out if it has continued to remain healthy 6 months on:

Q4 FY2020/21Q2 FY2021/22
Aggregate Leverage
(%)
30.3%30.1%
Average Term to
Debt Maturity (years)
2.9 years2.6 years
Average Cost of
Debt (%)
1.8%1.6%

My Observations: In my opinion, SPH REIT’s debt profile is a very healthy one – its aggregate leverage in fact is among one of the lowest in all the Singapore-listed REITs (S-REITs.) At 30.1%, there remains plentiful of debt headroom for the REIT to embark on further yield-accretive acquisitions (though I’m not very sure they will be embarking one in the near-term due to the current privatisation of Sponsor Singapore Press Holdings (SPH) by Cuscaden Peak, and depending on how many shareholders opt to receive “all cash” offer, SPH REIT may end up being privatised as well, if the number of units that Cuscaden Peak ended up holding crosses above a certain threshold – I await for further announcements regarding this.)

In terms of debt expiries, for the second half of the financial year, just S$105m (out of the REIT’s total borrowings of S$1.3 billion) will be up for renewal.

Distribution Per Unit

For the current quarter under review, the REIT’s management have declared a payout of 1.44 cents/unit to its unitholders, a 16.1% climb from its payout of 1.24 cents/unit in the same time period last year.

On a year-on-year basis, its distribution per unit for the first half of the current financial year (i.e. 1H FY2021/22) amounts to 2.68 cents/unit, a 9.8% increase from its payout of 2.44 cents/unit in the same time period last year (i.e. 1H FY2020/21.)

Closing Thoughts

All in all, I felt that the REIT’s performance was a stable one – the muted financial performance was pretty much expected, considering that the retail malls in Singapore are still facing headwinds (particularly Paragon, as tourist levels are still a far cry from the pre-Covid days), and also the fact that the REIT did not embark on any new acquisitions. However, its portfolio occupancy as well as its debt profile continue to remain very resilient (at levels which I am very comfortable with.)

Moving forward, with Singapore significantly relaxing its safe management protocols, especially with immigration borders fully reopened for tourists, footfall, along with tenant sales in Paragon should see improvements in the coming quarters ahead (and contributing positively to the REIT’s financial performance.)

Finally, as to whether or not SPH REIT may end up being privatised, we can only wait and see for now – and as I’ve mentioned earlier, it all depends on how many shareholders of SPH end up choosing the “all cash” offer by Cuscaden Peak (in its privatisation of SPH.)

With that, I have come to the end of my post to review SPH REIT’s latest results for the first half of the financial year 2021/22. Please note that all opinions above are solely my own, and they do not represent any buy or sell calls for the REIT’s units. As always, please 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.