SPH REIT
SK6U.SI
SPH REIT - Steady Performance
- Results in line, 3QFY17 DPU forms 24.3% of our FY17F forecast.
- Positive rental reversion of 3.7%, portfolio committed occupancy at 100%.
- Slight addition of NLA at Clementi Mall could provide c.S$0.8m of annual rents.
- Low gearing of 25.6%.
- Maintain Hold, with a slightly higher Target Price of S$1.04.
Results in line
- The 3QFY17 DPU of 1.37 Scts, +0.7% yoy, was in line with our expectations. This was driven by a 2.1% improvement in revenue to S$53.3m, up 2.1% yoy.
- NPI rose a higher 5.4% yoy to S$42.2m thanks to proactive management of utility contracts, lower property tax and marketing expenses.
- For the 9M, DPU rose 0.4% yoy to 4.11 Scts, making up c.73% of our FY17F forecast.
Enjoying positive rental reversions
- The trust enjoyed positive rental reversion of 3.7% for the 27.6% of portfolio NLA expiring during the quarter. Portfolio committed occupancy remained at 100%. Shopper footfall across both properties was largely stable.
- Paragon enjoyed a 3.6% rise over preceding rents for the 13.4% of space that was renewed.
Completed Clementi Mall renewal cycle
- Meanwhile, Clementi Mall completed its second rental renewal cycle, with 80% of its NLA re-contracted at 3.7% higher rents and retention rate of 89%. Some of the new offerings include Royal Sporting House, Owndays and llaollao. Level 4 and basement spaces at the mall were also reconfigured to create additional lettable area. This is expected to add another S$0.8m of rental income annually.
One of the lowest geared S-REITs
- Looking ahead, the trust has another 20.9% and 20.8% of NLA to be renewed in FY18 and FY19, respectively.
- We believe SPH REIT would continue to enjoy modest but positive uplifts for these expiries.
- In addition, with one of the lowest gearing levels amongst S-REITs of 25.6% as at 3QFY17, we believe the trust is well placed to tap acquisition growth opportunities in the medium term.
Maintain Hold
- We leave our FY17F-19F DPU estimates unchanged but tweak our DDM-target price slightly higher to S$1.04 as we adjust our assumed risk-free rate to 2.5% (previously 2.8%) in tandem with a flattening yield curve.
- We maintain our Hold recommendation as we await share price catalysts, including potential new acquisitions.
- Upside risks include new acquisitions and better than expected rental growth while downside risks include slow tenant take-up on renewals.
LOCK Mun Yee
CIMB Research
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YEO Zhi Bin
CIMB Research
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http://research.itradecimb.com/
2017-07-13
CIMB Research
SGX Stock
Analyst Report
1.04
Up
1.010
