On 7th August 2023, Paragon REIT announced their 1HFY2023 Financial Results. Paragon REIT was formerly known as “SPH REIT”. For those familiar with SPH REIT, you may have followed the chain offer saga which resulted in today’s Paragon REIT.

Today, Paragon REIT has a portfolio of five assets in Singapore and Australia.

How has Paragon REIT performed in 1H FY2023?

Was Paragon REIT able to provide Unitholders with regular and stable distributions, and sustainable long-term growth in DPU and NAV per Unit as per how it promised Unitholders?

Let us take a look at Paragon REIT’s financial results below.

Paragon REIT 1HFY2023 Financial Results

Paragon REIT’s gross revenue rose 0.6% to S$143.1 million in 1H FY2023 as compared to 1H CY2022. Net Property Income (“NPI”) also grew 0.1% year-on-year to S$106.1 million for the same period.

Distribution per unit (“DPU”) for 1H FY2023 decline 15.7% to 2.42 cents which will be paid on 22nd September 2023. This was mainly due to the increase in interest cost which rose by S$14.7 million to S$25.5 million.

	1HFY2023 (S$’000)	1HCY2022 (S$’000)	Change
Gross Revenue	143,084	142,268	0.6%
Net Property Income	106,057	105,952	0.1%
Amount Available for Distribution	70,631	81,978	(13.8)%
Distributable Income	68,498	80,588	(15.0)%
Distribution Per Unit (“DPU”) (cents)	2.42	2.87	(15.7)%

Debt

As of 30th June 2023, Paragon REIT’s gearing ratio stood low at 29.8%. Weighted Average Term to Maturity stood at 2.3 years.

Similarly like most REITs, 85% of Paragon REIT’s debt are hedged at fixed interest rate to mitigate against sudden interest rate hikes. The average cost of debt stood at 4.05% for 1H FY2023.

As Paragon REIT had completed its refinancing of approximately S$95 million of debt in July 2023, there is no further refinancing required in FY2023.

Occupancy

Paragon REIT has a Singapore and Australia portfolio. As of 30th June 2023, the overall portfolio occupancy is healthy at 97.8%.

In Singapore, the progressive easing of Covid-19 measures and relaxation of border restrictions since May 2022 helped with the rise in tourist arrivals. In the first half of 2023, average monthly visitors rose to 1.04 million, from 0.25 million visitors in first half of 2022. We all know that more tourists indirectly translate to more retail tenant sales.

In Australia, total retail sales for New South Wales increased by 5.3% for the six-month period ended 30 June 2023 as compared to the same corresponding period in 2022.

Similarly, South Australia saw an increase in total retail sales of 7.4% for the six-month period ended 30 June 2023, compared to the same corresponding period in 2022.

Lease expiries

In terms of lease expiries, we need to keep a close watch on The Rail Mall and Westfield Marion given that 12% and 10% of leases are expiring in FY23 which have an impact on Gross Rental Income.

Current Dividend Yield

Based on Paragon REIT’s closing share price of S$0.90 and FY2022 full year distribution of 5.52 cents (exclude 1.72 cents), this translate to a current dividend yield of 6.13%.

Summary of Paragon REIT 1HFY2023 Financial Results

As usual, let me summarize the pro and cons based on Paragon REIT’s 1H FY2023 Financial Results.

Pros

Gross revenue rose 0.6% to S$143.1 million in 1H FY2023.
Net Property Income (“NPI”) also grew 0.1% year-on-year.
Paragon REIT’s gearing ratio continue to stand low at 29.8%.
85% of Paragon REIT’s debt are hedged at fixed interest rate.
No further refinancing required in FY2023.
Overall portfolio occupancy is healthy at 97.8%.
Attractive current dividend yield of 6.13%.

Cons

DPU for 1H FY2023 decline 15.7% to 2.42 cents.
12% and 10% of leases at The Rail Mall and Westfield Marion are expiring in FY23 which have an impact on Gross Rental Income.