SPH Reit 2QFY20 DPU Dipped 78.7% Due to COVID-19

No, it is not an April Fool’s Day joke. On 1st April 2020, SPH REIT announced its 2QFY20 financial results. Even though gross revenue has increased by 26.1% due to the new contribution from Westfield Marion Shopping Centre, the distribution income fell 77% and distribution per unit (“DPU”) fell 78.9%. The DPU payout for 2QFY20 is 0.30 cents in anticipation of COVID-19 challenges.

The following explains the decline in DPU.

Following the emergence of COVID-19, SPH REIT announced a Tenants’ Assistance scheme on 27 February 2020 to assist tenants impacted by the outbreak. Subsequent to 2Q 2020, S$4.6 million of rental rebates for February and March were set aside and the February tranche of the rebate will be credited to tenants commencing from April 2020. The S$4.6 million has not been recognised in the 6 months period ended 29 February 2020.

2QFY20 Financial Results

2QFY20
(S$’000)
2QFY19
(S$’000)
Change
Gross Revenue 73,268 53,123 26.1%
Net Property Income 56,532 45,855 23.3%
Distributable Income 8,272 36,440 (77.3)%
Distribution Per Unit (“DPU”) (cents) 0.30 1.41 (78.7)%

Occupancy

Occupancy remains healthy at 98.9%.

  • Paragon (99.9%)
  • The Clementi Mall (100%)
  • The Rail Mall (92.2%)
  • Figtree Grove Shopping Centre (99.2%)
  • Westfield Marion Shopping Centre (98.4%)

Lease Expiry

The lease expiry for Paragon and The Clementi Mall is less worrying but I do see a higher lease expiry percentage for The Rail Mall, Figtree Grove and Westfield Marion Shopping Centre in FY20 which can impact the gross rental income.

The challenges for lease renewal can be the measures that are currently imposed due to COVID-19 such as the closure of restaurants, gyms, cafes and cinemas. Shopper traffic is also significantly reduced due to travel bans and restrictions to stay at home.

Dividend Yield

Besides this quarter, I am expecting future dividends over the next few quarters or even next financial year to be cut as well (depending on how long the COVID-19 situation will drag).1.38 cents was already paid out in 1QFY20. So if we based on the modest distribution of 0.30 cents in the next two quarters, I estimate the total distribution to be 2.28 cents.

Thus, based on the current share price of S$0.71 and a total DPU of 2.28 cents for FY20, the estimated dividend yield is 3.21%. Will the share price dipped further? I am not sure as no one has a crystal ball.

Is it a good time to enter into SPH REIT now? The REIT is at its historical high yield (7.89%) and my thought is that we should buy in small tranches should you want to buy into SPH Reit right now. If the share price fall lower, then deploy a second tranche.

The dividend yield will recover when the market recovers.

SPH REIT 1QFY20 Financial Results

The share price of SPH REIT has came down recently from S$1.07 to S$1.03. This has got me worried whether if I missed any bad news on SPH REIT which caused the share price to be on a downtrend. If you are aware of any, please post in the comments below. I have also noticed that I have not reviewed SPH REIT’s 1QFY20 financial results that was released on 10th January 2020.

Investors should know that COVID 19 is not a long term situation but such short term situation does cause panic in the stock market. We all know that retails REITs are impacted by the current COVID 19 situation but could there be any bad news that I have missed for SPH REIT that affects the fundamentals?

Let us take a quick look at SPH REIT’s 1QFY20 financial results.

1QFY20 Financial Results

1QFY20
(S$’000)
1QFY19
(S$’000)
Change
Gross Revenue 60,137 53,805 11.8%
Net Property Income 46,964 41,786 12.4%
Distributable Income 35,800 34,602 3.5%
Distribution Per Unit (“DPU”) (cents) 1.38 1.34 3.0%

Occupancy

Total portfolio occupancy stood at 99.3% which is very healthy.

Debt

The gearing ratio stood at 26.8% as compared to 27.5% in 4QFY19. One of the positives for SPH REIT is that its debt level is very low as compared to other REITs.

Current Dividend Yield

Like I have shared, the share price has came down due to the current COVID 19 situation. Based on the historical dividend of 5.6 cents and current share price of S$1.03, this translates to a current dividend yield of 5.44%.

My Opinion

A quick check shows that the fundamentals of SPH REIT is still intact. This means crisis such as COVID 19 poses an opportunity to buy into SPH REIT when its share price starts to fall because of panic in the market. Of course I believe there will be disruptions due to the fell in tourist and shoppers at its malls but this should be short term.

Singtel 3QFY20 Net Profit Fell 24% – Should You Buy?

Singtel had released its 3QFY20 financial results on 13 February 2020. The financial results are not so rosey, with operating revenue declining 5% to S$4.38 billion due to lower equipment sales, weak business sentiment and spending, continued price erosion in carriage services and heightened market competition.

Net Profit After Tax was down by 24% to S$627 million due mainly to the weakness in the enterprise business, the impact of the final settlement of a gain on the Airtel Africa pre-IPO investment and lower exceptional gains.

3QFY20
(S$ Mil)
3QFY19
(S$ Mil)
% Change
Operating Revenue 4,378.3 4,626.1 (5%)
Net Profit After Tax 627.2 822.8 (24%)

As shared previously, 48% of Singtel’s net profit comes from its regional associates.

I am glad that Profit Before Tax from its Regional Associates increased 15% to S$393 million. This was driven by strong data growth across all markets. Airtel’s losses narrowed, on the back of strong 4G customer growth, customer upgrades and price increases in India. Its African operations also saw growth momentum in carriage and mobile money services. The stronger operating performances mitigated higher costs and depreciation from its network expansion.

Debt

Singtel’s Net Debt stood at S$12.4 billion. Net debt gearing ratio stood at 31.7%.

Free Cash Flow

Free cash flow for the nine months was up 8% at S$2.74 billion.

Current Dividend Yield

If Singtel maintains the dividend pay out of 17.5 cents, based on the current share price of S$3.17, this translates to a current dividend yield of 5.52% which I deemed attractive given most REITs current yield have fallen to slightly above 5%.

If Singtel is to cut its dividend pay out to 15.8 cents (based on year 2012), the current dividend yield will be 4.98%.

Note: Singtel has a dividend policy to maintain pay out of 17.5 cents until March 2020.

Potential Catalyst

A joint application with consortium partner, Grab, for a digital full bank licence in Singapore has also been submitted in December 2019. The license will allow them to lend monies to companies. Singtel and Grab will know if their application has been approved by mid 2020.