SPH REIT - CGS-CIMB Research 2021-10-05: Holding Up Well

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SPH REIT (SGX:SK6U)

SPH REIT - Holding Up Well

• SPH REIT's FY21 revenue was better, driven by lower rental rebates and acquisition.
• Rental reversions of -8% to -10% were within expectations. Tenant sales held up well, near pre-COVID-19 levels for malls less affected by lockdowns.
• Reiterate ADD. Low gearing provides flexibility for acquisitions and AEIs.

Lower rental rebates and acquisition drove topline growth

• SPH REIT (SGX:SK6U)’s FY21 (Sep 2020 to Aug 2021) revenue rose by 14.8% y-o-y to S$277.2m (-2% h-o-h), coming in at 98% of our full-year forecast.
• The stronger results were driven by higher revenue across all assets mainly due to lower rental relief provided and full year financial contribution from Westfield Marion. In tandem with the stronger revenue y-o-y, NPI increased 11.4% y-o-y while PBT was up 26.5% y-o-y, driven by lower finance cost (-27.1% y-o-y to S$24m) on lower interest rate from loan refinancing.
• SPH REIT's FY21 DPU jumped 98.5% y-o-y to S$0.054 (largely in line at 96.4% of our FY21F) due to stronger y-o-y performance, redistribution of deferred income (S$14.5m) from last year and release of tax-exempt income (S$6.1m) from Australia subsidiaries. FY21 DPU of S$0.054 per unit represented a 95% payout ratio.

Operating metrics holding up well

• In Singapore, Paragon reported -8.3% rental reversion in FY21, partially helped by the resilient understand that the recent tighter 2-person dine-in COVID-19 measure (from 5-pax dine-in) has little impact on malls’ footfall.

Ample room for acquisitions

• SPH REIT’s gearing improved slightly from 2%. Its relatively low gearing provides ample flexibility for acquisitions.

Reiterate ADD with a slightly lower DDM-based Target price of S$1.03

• We cut our FY22-23F DPU forecast for SPH REIT by 3-4% after imputing a more conservative rental.
• See
  • SPH REIT's Share Price,
  • SPH REIT's Target Price,
  • SPH REIT's Analyst Reports,
  • SPH REIT's Dividend History,
  • SPH REIT's Announcements,
  • SPH REIT's Latest News.
• Re-rating catalyst: accretive acquisitions.
• Downside risks: weaker rental reversion.
• See SPH REIT's ESG highlights in report attached below.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-10-05

SGX Stock Analyst Report ADD MAINTAIN ADD 1.03 DOWN 1.040