Before market hours this morning (27 July), Suntec REIT (SGX:T82U), with retail and office properties in Singapore (Suntec City, One Raffles Quay, and MBFC Properties), Australia (177 Pacific Highway, 21 Harris Street, Southgate Complex, Olderfleet, 477 Collins Street, and 55 Currie Street), as well as in the United Kingdom (Nova Properties and The Minster Building), have made available its financial results for the first half of the financial year ended 30 June 2022 (i.e. 1H FY2022.)

As a unitholder of the Singapore-listed REIT, I have studied the documents posted and in this post, you’ll find my review of its latest financial results, portfolio and debt profile, along with its distribution payout to unitholders.

Let’s begin:

Financial Performance (1H FY2021 vs. 1H FY2022, and Q2 FY2021 vs. Q2 FY2022)

In this section, you’ll find the REIT’s financial results both on a year-on-year (y-o-y) basis (i.e. 1H FY2021 vs. 1H FY2022), as well as on a quarter-on-quarter (q-o-q) basis (i.e. Q2 FY2021 vs. Q2 FY2022 – which I have manually computed based on the figures provided for the first quarter, as well as for the first half of the respective financial years):

1H FY2021 vs. 1H FY2022:

1H FY20211H FY2022Variance (%)
Gross Revenue
(S$’mil)
$166.8m$203.5m+22.1%
Property Operating
Expenses (S$’mil)
$54.1m$50.6m-6.5%
Net Property
Income (S$’mil)
$112.6m$152.9m+35.8%
Distributable Income
to Unitholders
(S$’mil)
$118.2m$138.1m+16.9%

Personally, I felt that REIT’s results on a y-o-y basis is a resilient one – where both its gross revenue and net property income recorded strong double-digit percentage growth due to contribution from The Minster Building (newly acquired in July 2021), higher revenue from Suntec City Mall (from higher occupancy, higher fixed and gross turnover rent, and higher marcoms revenue) and Office (from higher occupancy and rent), Suntec Singapore (for those who are not aware what this is, it is the Suntec Convention Centre, where it saw an improvement in its revenue from more corporate events, conferences, and long-term licenses), 21 Harris Street and Olderfleet, 477 Collins Street (both properties saw higher revenue contribution due to higher occupancy and rent, partially offset by a weaker Australian Dollar.)

Q2 FY2021 vs. Q2 FY2022:

Q2 FY2021Q2 FY2022Variance (%)
Gross Revenue
(S$’mil)
$79.7m$104.3m+31.0%
Property Operating
Expenses (S$’mil)
$26.5m$25.7m-3.0%
Net Property
Income (S$’mil)
$53.1m$78.6m+48.0%
Distributable Income
to Unitholders
(S$’mil)
$60.1m$75.2m+25.2%

My Observations: On a q-o-q basis, the REIT also recorded very strong double-digit percentage improvement due to higher revenue contribution from Suntec City (both its mall and office), Suntec Singapore (contributed by the resumption of MICE activities following the relaxation of safe management measures by the Singapore government), along with contributions from The Minster Building in the United Kingdom (acquired in July 2021.)

As a unitholder of the REIT, resilient resilient like this is very encouraging to note.

Portfolio Occupancy (Q1 FY2022 vs. Q2 FY2022)

Moving on, let us take a look at the REIT’s portfolio occupancy profile – where I will be comparing the statistics reported for the current quarter under review (i.e. Q2 FY2022 ended 30 June 2022) against that reported in the previous quarter 3 months ago (i.e. Q1 FY2022 ended 31 March 2022) to find out if it has continued to remain resilient:

Q1 FY2022Q2 FY2022Difference (in
Percentage Points – pp)
Singapore Retail95.7%95.7%
Singapore Office97.8%97.8%
Australia (Retail & Office)94.3%95.0%+0.7pp
United Kingdom Office98.3%98.3%

My Observations: Looking at the portfolio occupancy rates of its properties in the various geographical locations, they remain unchanged compared to the last quarter (except for its Australia Retail & Office properties, which saw a 0.7pp improvement due to increases in occupancy rates in 21 Harris Street [up from 91.0% in Q1 FY2022 to 92.7% in Q2 FY2022], Southgate Complex [up from 90.1% in Q1 FY2022 to 91.5% in Q2 FY2022], and also in Olderfleet, 477 Collins Street [up from 98.3% in Q1 FY2022 to 98.7% in Q2 FY2022].)

In terms of rental reversions, Suntec City Mall’s rental reversion was at a positive 1.5%, and Suntec City Office’s rental reversion was at a positive +3.1% – both in my opinion are encouraging statistics to note.

Debt Profile (Q1 FY2022 vs. Q2 FY2022)

As far as the REIT’s debt profile is concerned, if you have been following my quarterly reviews about the REIT, you’re probably aware that one of the concerns I have is its high aggregate leverage, along with its low interest coverage ratio. In fact, the REIT has one of the highest aggregate leverage, along with one of the lowest interest coverage ratio among all the Singapore-listed REITs.

While these 2 statistic have shown some improvements in the recent quarters, I’m still concerned by it, and even more so now, as the hike in interest rates will definitely negatively impact these 2 statistics to a certain extent.

Having said that, has the REIT’s debt profile shown further improvements in the current quarter under review (i.e. Q2 FY2022 ended 30 June 2022) compared to the previous quarter 3 months ago (i.e. Q1 FY2022 ended 31 March 2022)?

Let us have a look in the table below:

Q1 FY2022Q2 FY2022
Aggregate Leverage
(%)
43.3%43.1%
Interest Coverage
Ratio (times)
2.6x2.7x
Average Term to Debt
Maturity (years)
2.7 years3.0 years
Average Cost of
Debt (%)
2.3%2.5%

My Observations: Compared to the previous quarter, I’m encouraged to see the REIT making further in-roads as far as improving its debt profile is concerned – with slight improvements seen in its aggregate leverage, interest coverage ratio, as well as its debt maturity (where it has no more debt due for refinancing in the remainder of the current financial year 2022.)

If there’s a slight negative to highlight, it is the fact that the REIT has only has approximately 56% of its borrowings are hedged to fixed rates – a little bit low in my opinion, and this means the REIT will be exposed to potential risks related to interest rate hikes to a certain extent. Also, no doubt its aggregate leverage have continued to improve, but at 43.1%, it is still on the high side (and it continues to remain one of the highest among the Singapore-listed REITs) – both of them are something I will continue to keep a close watch on in the coming quarters ahead.

Distribution Payout to Unitholders

For information, Suntec REIT is one of the few Singapore-listed REITs that is continuing to declare a distribution payout to its unitholders on a quarterly basis.

For the second quarter under review, the management have declared a distribution payout of 2.42 cents/unit – a 14.7% increase from its payout of 2.109 cents/unit a year ago (i.e. Q2 FY2021.)

Also, looking at the REIT’s distribution payout on a y-o-y basis, together with its payout of 2.391 cents/unit in the first quarter, its total payout for the first half of the year totals to 4.81 cents/unit – a 15.8% improvement from its payout of 4.154 cents/unit in 1H FY2021.

Finally, if you are a unitholder of the REIT, the following are some important dates relating to its distribution payout to take note of:

Ex-Date: 03 August 2022
Record Date: 04 August 2022
Payout Date: 29 August 2022

Closing Thoughts

As a unitholder, I am happy with the REIT’s latest set of results – particularly, its financial results (both on a y-o-y, as well as on a q-o-q basis) continues to record a strong growth (where both its top- and bottom-line saw strong double-digit percentage improvements), portfolio occupancy continues to remain very strong (with its overall occupancy rates in Singapore, Australia, as well as in the United Kingdom are all at 90+%), and at the same time, improvements are also seen on the debt profile-front (with its aggregate leverage inching down further from 43.3% in the previous quarter to 43.1% in the current quarter under review.) Finally, its 14.7% and 15.8% q-o-q and y-o-y growth in its distribution per unit (respectively) is one where I am happy to note as well.

Just like in my review in the REIT’s results in the previous quarters, I remain concerned by the high aggregate leverage (where, at 40+%, the REIT continues to have one of the highest aggregate leverages among the Singapore-listed REITs.) Also, with only about 60% of its borrowings hedged to fixed rates, the REIT will be quite “exposed” to any negative impacts from further interest rate hikes, and this could ultimately impact its distribution payout to unitholders – I will continue to keep a close watch on these 2 statistics very closely in the coming quarters ahead.

With that, I have come to the end of my review of Suntec REIT’s latest results for the first half of the financial year 2022. I do hope you’ve found the contents above useful, and at the same time, do take note that all the opinions are solely mine which I’m sharing for educational purposes only – they do not represent any buy or sell calls for the REIT’s units. As always, you should do your own due diligence before you make any investment decisions.

Related Documents

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

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