SPH REIT - CGS-CIMB Research 2021-03-29: Moving Towards A Recovery

SPH REIT (SGX:SK6U) | SGinvestors.io SPH REIT (SGX:SK6U)

SPH REIT - Moving Towards A Recovery

  • SPH REIT’s 1HFY21 DPU of S$0.0244 (+45.2% y-o-y, 2Q: +3.3% q-o-q) came in at 43% of FY21F DPU but we deem this to be in line.
  • Its Singapore portfolio reported +0.4% rental reversion despite COVID-19; occupancy rate remained high at 97-100%.
  • Reiterate ADD. Encouraging tenant sales and positive vaccine development point towards a recovery.

Stronger revenue, mainly driven by acquisition

  • SPH REIT (SGX:SK6U)’s 1HFY21 (Sep 2020 to Feb 2021) revenue grew by 4.9% y-o-y to S$140m while NPI improved 1.3% y-o-y to S$104.9m, coming in at 49.6% of our full-year forecast.
  • The stronger results were mainly driven by the full-year acquisition of Westfield Marion (completed in Dec 2019) vs 3-months income contribution last year. This, together with the better performance from The Rail Mall (+10.3% y-o-y) and Figtree (+4.6% y-o-y), helped to offset the weaker revenue from Paragon (-8% y-o-y) and The Clementi Mall (-3.1% y-o-y).
  • As a whole, Singapore revenue declined 6.7% y-o-y while Australia revenue jumped 68.2% y-o-y. The weaker Singapore revenue was mainly due to rental relief granted to tenants.
  • SPH REIT's 1HFY21 DPU of S$0.0244 grew 45.2% y-o-y (2Q: +3.3% q-o-q) given the low base effect last year as the REIT retained income due to COVID-19. 1HFY21 DPU came in at 43% of our FY21F forecast due to lower dividend payout ratio of 88% vs our full-year assumption of 95%. We deem this to be in line as we expect SPH REIT to release more income as operating environment improves.

Stable operating metrics

  • The Rail Mall and The Figtree’s occupancy remained stable q-o-q at 99-100%. Despite COVID-19, Clementi Mall and Westfield Marion saw occupancy improve by 0.4% points and 0.6% points q-o-q to 100% and 97.9%, respectively. Only Paragon reported a slight drop of 0.9% points q-o-q in occupancy to 97.1%.
  • SPH REIT's 1HFY21 Singapore portfolio rental reversion was flat at +0.4%. While Paragon and The Rail Mall delivered positive rental reversion of +1.3% and +5.4%, the Clementi Mall reported -7.8% rental reversion on 15,930 sqft of leases which represents a relatively small 8.2% of total mall NLA.
  • While Paragon’s tenant sales in Jan-Feb 2021 continued to be lower vs 2019, it was well supported by local consumption. The Clementi Mall, Westfield Marion and Figtree’s tenant sales in Jan-Feb 2021 tracked closely to prior years before COVID-19.

Reiterate ADD on SPH REIT with an unchanged DDM-based Target price of S$1.06

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-03-29
SGX Stock Analyst Report ADD MAINTAIN ADD 1.060 SAME 1.060