SPH REIT has announced a distribution per unit (“DPU”) of 0.50 cents for 3QFY20. This is a modest increase as compared to 0.30 cents paid in 2QFY20. If you are not aware, the DPU payout was reduced since 2QFY20 in anticipation of COVID-19 challenges.
Despite the current challenging retail environment, SPH REIT’s portfolio occupancy rate stood healthy at 98.8%. The Weight Average Lease Expiry (“WALE”) stood at 4.1 years.
In the last quarter, Clementi Mall and The Rail Mall have 17% and 26% lease expiry by Net Lettable Area. I am glad that this has been reduced to 0% which means investors do not have to worry about lease expiry for its Singapore portfolio in FY20.
There is still much to be done for SPH REIT’s Australian portfolio. 28% of leases are expiring in FY20 which can impact the gross rental income.
As you can see below, this is how bad the damage that the COVID-19 pandemic has done to the shopping malls. Visitor traffic fell from 4.6 million in 3QFY19 to 1.9 million in 3QFY20 for Paragon Shopping Centre. We can imagine Orchard road like a “ghost town”.
Suburban malls such as The Clementi Mall was not spared either. Visitor traffic fell from 8.0 million in 3QFY19 to 3.8 million in 3QFY20.
1.38 cents and 0.30 cents were already paid out in 1QFY20 and 2QFY20 respectively. Based on 0.50 cents paid in the current quarter and next quarter, the estimated total dividend paid out by SPH REIT in FY20 will be 2.68 cents.
Based on an estimated payout of 2.68 cents and current share price of S$0.88, this translates to an estimated dividend yield of 3.1%.
If you are confident SPH REIT will regain its high DPU payout of 5.60 cents in FY21 (similar to FY19), this translates to an estimated dividend yield of 6.36% based on the current price.
As Singapore and Australia starts to recover from the COVID-19 pandemic, shoppers are starting to come back to the malls. As other retail REITs have yet to release their latest financial results or updates, I am unable to determine whether the malls under SPH REIT are recovering faster than the others such as CapitaMall Trust.
One thing for sure is that the DPU for retail REITs will remain depressed below 5% in FY20.