SPH REIT (SGX:SK6U)
SPH REIT - Slow Recovery; High Occupancy Cushions Negative Rental Reversions
- SPH REIT (SGX:SK6U)’s 4Q21 DPU jumped ~193% y-o-y and ~15% q-o-q, with lower rental assistance, and a gradual recovery in tenant sales. While occupancies were resilient, portfolio rental reversion was weaker at -8.4% for FY21, versus +0.4% in 1H21.
- Paragon’s recovery will need time, with negative reversions to persist, given softer tenant sales and absent tourism spend until 2H22.
Singapore portfolio – better at Clementi Mall
- SPH REIT's portfolio occupancy improved q-o-q from 98.4% to 98.8% due to Paragon, which rose from 97.3% to 99.1%.
- Paragon’s revenue fell 7.6% y-o-y in 4Q21, with rental reversion at -8.3% in FY21, versus +1.3% in 1H21. Despite a 17% y-o-y decline in footfall, its tenant sales remained stable, but were ~29% below pre-COVID levels.
- Similarly, notwithstanding a 33% y-o-y decrease in footfall in Clementi Mall, its tenant sales rose 5% y-o-y, to -8.4% of FY19 level. While rising vaccination rates and easing travel restrictions should support recovery in FY22, rental reversions will likely remain soft.
Australia assets more resilient, set to improve
- SPH REIT's Australian malls fared better as revenue lifted around 11 Oct, we see steady improvement in fundamentals into FY22, underpinned by resilient occupancies.
Conservative balance sheet, acquisition upside
- Cap rates were stable in Singapore (at 3.75-6.0%), and they compressed by the S$480m asset could add ~8% to our FY22 estimates.
SPH REIT - Valuations
- We raised SPH REIT's FY22-23 DPUs forecast by 4%, rolled forward FTSE EPRA Nareit Index inclusion, and sponsor restructuring underway.
- See
- We prefer Frasers Centrepoint Trust (SGX:J69U) for its concentrated suburban mall portfolio.
- See SPH REIT's ESG metrics in report attached below.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-10-05
SGX Stock
Analyst Report
0.95
UP
0.800
