SPH REIT - CIMB Research 2017-01-11: 1QFY17 Steady performance

SPH REIT - CIMB Research 2017-01-11: 1QFY17 Steady performance SPH REIT SK6U.SI

SPH REIT - 1QFY17 Steady performance

  • 1QFY17 DPU of 1.34 Scts (+0.8% yoy) was in line with consensus and our expectations, forming 24% of our full-year forecast.
  • Positive rental reversion of 4.6% across the portfolio on full occupancy.
  • 1QFY17 visitor traffic remained steady at c.12m.
  • AEI and new acquisitions could spur further upside in the mid term.
  • Maintain Hold with an unchanged target price on limited upside in the near term.

1QFY17 results: in line 

  • SPHREIT’s 1QFY8/17 results remained steady. 
  • Gross revenue inched up 1% yoy to S$52.6m (US$36.8m) while NPI increased 3.3% yoy to S$41.4m owing to proactive management of utility and other key service contracts. 
  • 1QFY17 NPI margin was 78.8% (up 1.8% pts qoq and yoy). 
  • Income available for distribution correspondingly rose 3% yoy while DPU inched up 0.8% yoy to 1.34 Scts.

Positive portfolio rental reversion of 4.6% 

  • Portfolio occupancy remained full and there was a positive rental reversion of 4.6% over preceding levels across the portfolio. Of this, Paragon achieved +4.4% reversion on 4.5% of its space renewed in the quarter. The Clementi Mall achieved +9.1% reversion for 0.7% its space. 
  • Looking ahead, 5.3% of Paragon’s and 37.5% of The Clementi Mall’s NLA is up for renewal in the remainder of FY17.

Refreshing tenant mix 

  • 1QFY17 visitor traffic remained steady at c.12m. 
  • During the quarter, Paragon welcomed a new-to-market F&B offering, Greyhound Cafe, as well as sporting brand Puma. At the Clementi Mall, the revamped eatery cluster opened in Nov.

AEI and new acquisitions could spur further upside in the mid term 

  • We believe ongoing asset enhancements such as the decanting and conversion of back-of-house space at Paragon and creating a more efficient layout at Clementi Mall should lift revenue marginally over the next two years. 
  • A low gearing level of 25.7% should also enable the trust to explore inorganic growth opportunities.

Maintain Hold 

  • We leave our FY17-19 DPU estimates unchanged and maintain our DDM-based target price at S$0.95. Retain a Hold call on limited near-term upside. 
  • Upside/downside risks on retail environment and leasing activities. 
  • On a last note, the manager intends to elect for partial payment in cash for its fees going forward (prev. 100% paid in units). The proportion of cash will be determined before the start of each quarter, with the intention of keeping annual DPU steady.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-01-11
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 0.950 Same 0.950