SPH REIT - OCBC Investment 2020-01-13: In-line Set Of Results

SPH REIT (SGX:SK6U)

SPH REIT - In-line Set Of Results

SPH REIT (SGX:SK6U)’s 1QFY20 results came in within expectations. Gross revenue grew by S$6.3m or 11.8% y-o-y to S$60.1m and net property income (NPI) increased by S$5.2m or 12.4% y-o-y to S$47.0, on the back of higher contributions from Paragon and Figtree Grove Shopping Centre, Australia which was acquired on 21 Dec 2018. See SPH REIT Announcements; SPH REIT Latest News.
DPU reported a growth of 3% y-o-y to 1.38 S cents, which was in-line, at 24% of our initial full-year estimate. See SPH REIT Dividend History.
Gearing ratio remained healthy at 26.8% and average cost of debt was 2.91% as at 31 August 2019.

Overall portfolio committed occupancy remained strong at 99.3%. SPH REIT’s three assets in the Singapore portfolio reported positive rental reversions of 10.9% and high occupancy rate of 99.4%, while Figtree Grove Shopping Centre’s occupancy remained strong at 99.2% in 1QFY20.
For Paragon, its rental reversions came in at +10.7%, representing 5.5% of NLA. For The Clementi Mall and The Rail Mall, they reported positive rental reversions of +10.6% and +12.8% respectively, representing 2.5% and 19.6% of the property’s NLA each.
As for NPI, Paragon and The Clementi Mall saw an increase of 5.4% and 3.9% respectively, while The Rail Mall’s NPI remained flat.

The acquisition of a 50.0% interest in Westfield Marion Shopping Centre, Australia, was completed in Dec 2019. The acquisition was financed through a combination of the proceeds from the S$300m of perpetual securities, proceeds from the private placement of 156,645,000 units at an issue price of S$1.050 per unit and debt.
The manager expects DPU accretion of 1.6% for this deal and an implied NPI yield of 5.6%. After factoring this development in our model, our fair value estimate increases slightly from S$1.10 to S$1.13. See SPH REIT Share Price; SPH REIT Target Price.
Maintain HOLD.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-01-13

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.13 UP 1.100