SPH REIT 1QFY2022 Updates

SPH REIT Portfolio

SPH REIT has provided their key business and operational updates for 1QFY2022 on 7th January 2022. The key highlight of the updates is focused on SPH REIT’s portfolio occupancy and tenant sales.

In Singapore, occupancy improved to 99.8% from 98.9% in 4Q FY21. Tenants’ sales stayed resilient in 1Q FY22 despite a 6 weeks restriction in dining-in (limited 2 pax vs 5 pax in 1Q FY21) with sales reaching 97% of 1Q FY21 for Paragon and The Clementi Mall.

In Australia, Westfield Marion Shopping Centre continued to demonstrate its dominance in Adelaide, South Australia, with tenant sales increasing 6% year-on-year in the midst of COVID-19.

Figtree Grove Shopping Centre, located in Wollongong, New South Wales, was in lockdown for approx. 3.5 months until 10 Oct 21. Tenant sales have recovered close to pre-COVID-19 levels for Nov 2021 post lifting of lockdown.

Occupancy

Overall portfolio occupancy stood healthily at 98.8% with a Weighted Average Lease Expiry (WALE) at 5.5 years.

Compared to a year ago, occupancy has improved across the malls.

As of 30 November 2021, the occupancy for each asset is as follows:

  • Paragon (99.7%)
  • The Clementi Mall (99.9%)
  • The Rail Mall (100.0%)
  • Figtree Grove Shopping Centre (99.1%)
  • Westfield Marion Shopping Centre (98.2%)

Lease Expiry

Only 10% of the leases are expiring in terms of Net Lettable Area (“NLA”) in FY22.

SPH REIT 1Q2022 Lease Expiry

Debt

As of 30 November 2021, the total debt was estimated to be S$1.3 billion. The Weighted Average Term to Maturity stood at 2.7 years with debts well staggered over the next five years.

76% of the borrowings are hedged at fixed rate while the remaining 24% are based on floating rate. Thus, there is nothing much to worry about fluctuating foreign exchange rates which can affect borrowings.

S$225 million of revolving credit facilities are also available. Thus, there is nothing worrying about refinancing of it loans.

SPH REIT Debt Maturity Profile 1Q2022

Summary of SPH REIT 1QFY2022 Updates

Singapore’s Ministry of Health has stated that the Omicron variant is likely to be more transmissible but less severe than the Delta variant.

At the point of writing this post, the number of Omicron cases are on the rise. Let us hope that there are no more further tightening measures which can hinder the recovery of tenant sales and occupancy of retails malls.

SPH REIT 1QFY2021 Updates

SPH REIT Portfolio

SPH REIT has provided their key business and operational updates for 1QFY2021 on 13th January 2021.

Gross revenue was S$66.6 million which is an increase of 10.8% year-on-year, largely attributed to Westfield Marion’s contribution of S$12.8 million.

The Gross revenue from its Singapore assets decreased by 11.3% y-o-y to S$49.7m, largely attributed to the rental relief granted to assist tenants which were significantly impacted by COVID-19.

Footfall and tenant sales across the malls recovered during the year-end festive period. However, Paragon which primarily traffic comes from tourists continue to be impacted by border restrictions. Suburban malls such as the Clementi Mall continue to be impacted by the work-from-home arrangements.

The Gross revenue contributed by its Australian assets was S$16.9 million, an increase of S$12.8 million, driven by the acquisition of Westfield Marion in 2Q FY2020.

Despite the overall increase in gross revenue, a distribution per unit (DPU) of only 1.20 cents was declared for 1Q2021. This was a decrease of 13% as compared 1.38 cents paid in1Q2020.

Occupancy

Overall portfolio occupancy stood healthily at 97.9% with a Weighted Average Lease Expiry (WALE) at 5.5 years.

I notice that occupancy has improved for each individual mall. Surprisingly, the occupancy for The Rail Mall is 100%!

As of 30 November 2020, the occupancy for each asset is as follows:

  • Paragon (98.0%)
  • The Clementi Mall (99.6%)
  • The Rail Mall (100.0%)
  • Figtree Grove Shopping Centre (99.2%)
  • Westfield Marion Shopping Centre (97.3%)

Lease Expiry

As you can see below, 21% of the leases are expiring in terms of Net Lettable Area (“NLA”) in FY21. If the manager fails to proactively renew the leases, this will mean a loss of rental income. Since this is only the first quarter of FY2021, we should continue to monitor the expiring leases over the next 3 quarters.

SPH REIT 1Q2021 Lease Expiry

Debt

Gearing ratio information is not available in this update but if we based on 31st August 2020, the gearing ratio stood at 30.5%.

Refinancing of S$215 million loans maturing by July 2021 is in progress with revolving credit facility lines of S$225 million being available.

Current Dividend Yield

Based on the FY20 full year DPU of 2.72 cents and current share price of S$0.86, this translate to a current dividend yield of 3.16%.

SPH REIT Share Price 22 Jan 2021

Summary

SPH REIT makes up 11.93% of my stock portfolio. The REIT has been slow in recovery from the impact of the COVID-19 pandemic. This can be seen from the weakness in its share price. DPU continue to be depressed which is disappointing for dividend investors.

I can understand why as its prime asset Paragon Mall is primarily focused on tourists. The catalyst for a fast recovery will be the opening of the international borders where tourist return to shop in Singapore.

In the meantime, existing investors can only wait for the day for the border to open and SPH REIT can regain its glorious days. Having said that, SPH REIT is not sitting around doing nothing. The manager ventured into Australia. As you can see, its financial results can be worst without contribution from its Australian assets.