SPH REIT (SGX:SK6U)
SPH REIT - Low Gearing And Stable Income
- SPH REIT (SGX:SK6U) is a Singapore-listed retail real estate investment trust with a real estate portfolio in Singapore and Australia. It currently owns the Paragon Mall, The Clementi Mall, The Rail Mall in Singapore and a stake in Figtree Grove Shopping Centre in Australia.
CREDIT VIEW
Healthy credit profile –
- As at 31 May 2019, SPH REIT’s gearing ratio stood at 30.1%, below its peers’ average. Its average cost of debt was 2.89% and net interest coverage was at a healthy 6.0x, higher than its peers’ average. The current low-interest rate environment, coupled with the REIT’s low gearing and high debt headroom of almost SGD1bn, provide a conducive environment for future acquisitions in Australia and Singapore.
- Debt maturities are staggered evenly over the next few years, with the weighted average term to maturity standing at 1.8 years. As at 31 May 2019, c.70% of loans were secured at fixed rates, reducing interest rate risk.
Properties with high occupancy rates provide stable income –
- As at 31 May 2019, overall portfolio occupancy was at 99% with positive rental reversions stable at 8.4% YTD. Paragon and The Rail Mall enjoyed positive reversions of c.8.6% and c.9.1% respectively. The REIT also posted a 4.4% y-o-y growth in shopper traffic across its Singapore portfolio.
- SPH REIT’s portfolio lease expiry is evenly spread out over the next few years, allowing for more stable positive rental reversions as leases expire and require renewals.
- Majority of leases in Paragon, the highest contributor to net property income, were recently renewed. Upcoming lease expiries include c.70% of leases for The Clementi Mall is due in FY20, c.80% for The Rail Mall due in FY19-20F and c.14% for Figtree Grove Shopping Centre due in 4QFY19. These are opportunities for positive rental reversions and optimizing tenant mix.
Timothy Ang
Phillip Securities Research
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https://www.stocksbnb.com/
2019-08-20
SGX Stock
Analyst Report
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SAME
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