SPH REIT (SGX:SK6U)
SPH REIT - Gradual Recovery
- SPH REIT's 1QFY21 results broadly within expectations.
- Distribution per unit fell 13% y-o-y but improved 122% q-o-q.
- Gradual recovery of tenant sales and footfall.
S$0.0013 released from SPH REIT's deferred income in FY20
- SPH REIT (SGX:SK6U)’s 1QFY21 gross revenue grew 10.8% y-o-y to S$66.6m, driven by the acquisition of Westfield Marion in Dec 2019. 1QFY21 DPU fell 13% to S$0.012, which was broadly in-line, at 23% of our initial full-year estimate.
- SPH REIT released S$0.0013 of DPU retained in FY20.
- Recall that S$14.5m of distributable income or DPU of 0.52 cents in FY20 was deferred to FY21 as part of the COVID-19 support measures by IRAS. Management will take a conservative approach to distribute the retained amount given the economic uncertainties.
SPH REIT's Australia portfolio performed better than that of Singapore
- We saw some recovery in visitor traffic and tenant sales in 1QFY21 but it was still below pre-COVID-19 levels.
- Despite some support from local consumption, Paragon continued to be impacted by low tourist arrivals with footfall and tenant sales down 34%/15% y-o-y. The recovery at Paragon will largely hinge on the reopening of borders and a meaningful recovery of international travel to Singapore, which may take 3-5 years to return to pre-COVID-19 levels, according to Singapore Tourism Board back in Sep 2020.
- The Clementi Mall was also impacted from WFH arrangement but likely to improve as people slowly return to office.
- Overall, performance of its Australia portfolio was better than Singapore as the location of the two assets in Australia are less reliant on tourists spending.
Occupancy remained healthy but rental reversions under pressure
- As at 31 Dec 2020, SPH REIT’s portfolio occupancy rate remained healthy at 97.9% but management highlighted negative rental reversions in 1QFY21. 29% of leases by gross rental income are due for expiry in FY21.
- We expect rental reversions to remain under pressure in FY21 as business sentiment remains weak and tenant retention is prioritised. We decrease our COE from 7.8% to 7.4%, given positive developments on vaccines. After adjustments, our fair value estimate increases from S$0.82 to S$0.88.
- See SPH REIT Share Price; SPH REIT Target Price; SPH REIT Analyst Reports; SPH REIT Dividend History; SPH REIT Announcements; SPH REIT Latest News.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2021-01-15
SGX Stock
Analyst Report
0.88
UP
0.820
