SPH REIT 3QFY20 DPU Remain Depressed

SPH REIT Portfolio

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.

Occupancy

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.

Lease Expiry

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.

SPH REIT Lease Expiry 3QFY20 Singapore

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.

SPH REIT 3QFY20 DPU Remain Depressed

Shopper Traffic

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.

SPH REIT 3QFY20 Shopper Traffic

Dividend Yield

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.

SPH REIT Share Price 3 Jul 2020

Summary

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.

Screening For Dividend Stocks In April 2020

Screening For Dividend Stocks In April 2020

Last month, the stock market had crashed due to the impact of COVID-19. Since then, the stock market has started its recovery when news of government from different countries started to provide stimulus budget to revive the economy. During the crisis, I have picked up OCBC Bank, Singtel, US Manulife REIT and added more of CapitaMall Trust when their stock prices fell. If you didn’t know, I am a dividend investor. Thus, I usually look out for stocks with attractive dividend yield that provides me with endless dividends many years ahead. The stock market crash has provided me with such an opportunity.

I will run the Stocks Café stock screener every month which gives me a list of stocks that fulfill my dividend criteria. I fall into the medium risk type of investor and thus I never looked at stocks with dividend yield more than 10%. Below are the criteria that I used to identify dividend stocks.

  • Current Yield (%) >= 5 and <= 10
  • Price / Earnings <=20
  • Price / Book <= 3
  • Market Capitalization >= 1B

Below are the top dividend yielding stocks as of 10th April 2020. I believe you will see some REITs that you have been eyeing for before the stock market had crashed. Even though the stock prices have started the recovery, the current yield is still attractive.

NameCurrent Yield %P/EP/BMarket Cap
Mapletree NAC Trust9.9814.440.6112.8B
OUE Commercial REIT8.71113.380.6182B
Ascendas-iTrust8.6445.291.0841.4B
DBS7.8377.650.99848.7B
Frasers Logistics and Industrial Trust7.5689.050.9742.1B
CapitaRetail China Trust7.5578.460.8451.6B
Frasers Commercial Trust7.3857.910.7941.2B
Suntec REIT7.379.210.6053.6B
CapitaMall Trust7.1258.890.7986.2B
Ascendas REIT7.03817.71.2910.1B
Yanlord Land6.7332.970.3582B
ComfortDelgro6.52712.251.2523.2B
Frasers Centrepoint Trust6.2759.410.872.2B
UOB6.1977.740.84933.4B
SIA Engineering6.1810.441.292B
CapitaCommercial Trust6.08212.770.7845.6B
SPH REIT6.08111.840.7862.1B
TCIL HK$6.04417.20.3293.7B
SATS5.93815.92.2113.6B
OCBC Bank5.9227.910.86339.4B
Jardine Cycle & Carriage5.8336.710.8758.1B
Mapletree Commercial Trust5.5955.450.9555.6B
Yangzijiang Ship Building5.4355.90.6013.6B
Guocoland5.3855.720.3741.4B
Olam International5.2089.010.8524.6B
SPH5.19512.190.722.5B
Frasers Property5.1287.320.4533.4B
Lonza5.0425.720.6595.9B

Last, I just want to mention again that the above list is for reference only and we should do our homework before buying into the stock simply for the dividend yield.

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

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 Revenue73,26853,12326.1%
Net Property Income56,53245,85523.3%
Distributable Income8,27236,440(77.3)%
Distribution Per Unit (“DPU”) (cents)0.301.41(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.

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

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

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.

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

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.