SPH REIT FY2020 Financial Results (Full Year)

SPH REIT Portfolio

SPH REIT FY2020 Financial Results have been released on 6th October 2020. A Distribution Per Unit (“DPU”) of 0.54 cents have been declared for Q4 FY20. The FY20 full year distribution was 2.72 cents per unit. This was a decline of 51.4% as compared to FY19.

It was mentioned that as COVID-19 continues to evolve and there is no certainty when normalcy will return, for prudence in financial management, S$14.5 million of FY20’s income available for distribution has been deferred. In addition, for financial flexibility, S$15.0 million of capital allowance utilised to provide for capital expenditure and other working capital requirement.

As a unit holder of SPH REIT, these are the questions I will ask myself.

  • What was the impact?
  • What is the manager proactively doing to minimise the impact of COVID-19?
  • Will SPH REIT recover from the impact of COVID-19?

Let us take a look in details the financial results.

SPH REIT FY2020 Financial Results (Full Year)

Gross Revenue and Net Property Income improved by 5.6% and 1.2% respectively.

The gross revenue included the contribution of S$37.5 million from Westfield Marion Shopping Centre which was acquired on 6 December 2019.

Even though there was an increase in gross revenue, the increase in property expenses and following COVID-19 measures resulted in less distribution to unit holders.

  • SPH REIT’s Australia assets, though not spared the effects of COVID-19, were relatively
    less impacted for the relevant period, and an allowance for rent relief of S$8.1 million was provided for FY2020 to support eligible tenants affected by COVID-19.
  • For prudence in financial management, the distribution of S$14.5 million (S$0.52 cents) was deferred a part of the FY2020 income, to FY2021.
  • An amount of S$15.0 million of capital allowance was utilised to provide for capital expenditure and other working capital requirements.
FY2020
(S$’000)
FY2019
(S$’000)
Change
Gross Revenue 241,463 228,635 5.6%
Net Property Income 181,943 179,779 1.2%
Net Asset Value 0.91 0.95 (4.2)%
Property expenses
(59,520) (48,856) 21.8%
Income available for distribution 92,226 145,034 (36.4)%
Distribution to Unitholders 72,851 144,790 (49.7)%
Distribution Per Unit (“DPU”) (cents) 2.72 5.60 (51.4)%

Occupancy

As of 31st August 2020, the average occupancy for its Singapore and Australian assets stood at 97.8% and 97.7% respectively. I have noticed a slight decline in occupancy for across all its assets.

  • Paragon (97.8%)
  • The Clementi Mall (99.6%)
  • The Rail Mall (92.2%)
  • Figtree Grove Shopping Centre (99.2%)
  • Westfield Marion Shopping Centre (97.4%)

SPH REIT Occupancy 31 Aug 2020

Lease Expiry

I like the way SPH REIT summarises its lease expiry of its assets. As you can see, 2% of the leases are expiring in terms of Net Lettable Area (“NLA”) in FY20.

SPH REIT Lease Expiry Profile 31 Aug 2020

Below is the details of the lease expiry for each malls.

SPH REIT Lease Expiry Profile (Singapore Assets) 31 Aug 2020

SPH REIT Lease Expiry Profile (Australia Assets) 31 Aug 2020

Debt

As of 31st August 2020, the gearing ratio stood at 30.5%. This was an increase of 3.0% as compared to the gearing ratio of 27.5% a year ago.

Weighted Average Term to Maturity (WALE) stood at 2.9 years.

SPH REIT Debt Maturity Profile 31 Aug 2020

Current Dividend Yield

Based on the FY20 full year DPU of 2.72 cents and current share price of S$0.85, this translate to a current dividend yield of 3.2%.

SPH REIT Share Price 9 Oct 20

Summary

What was the impact?

Occupancy is what worries me the most. As borders continue to be locked down and work from home measures being implemented, shopper traffic is bound to decline across all SPH REIT Singapore assets which are mainly shopping malls.

Paragon which is located at the Orchard Road shopping precinct, registered a year-on-year decline in footfall of 27.4% to 13.8 million and a decline in tenant sales of 28.3% to S$508 million.

The Clementi Mall, which is located in a residential suburb, was impacted by work from home arrangements and saw a drop in visitor traffic of 27.8% to 22.8 million.

What is the manager proactively doing to minimise the impact of COVID-19?

What the manager did was to proactively renew and/or sign new leases in advance to mitigate against vacancies. You can see this from the low percentage of leases expiring in FY20 and the high occupancy rate of 97.7% which I think is a feat given the current situation.

The management has practiced prudent financial management by deferring the distribution of S$14.5 million to FY2021.

Will SPH REIT recover from the impact of COVID-19?

Given all the above measures that were taken, I am confident that SPH REIT will be able to ride through this storm. International visitor arrivals should remain weak in FY2021 given that countries around the globe is still trying to fight this pandemic.

DPU will definitely take time to recover to its glorious days. Meanwhile, keep calm and collect dividends!

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