SPH REIT’s 3rd Quarter Update for FY2019/20 – A Summary and My Thoughts (Guest Post)

SPH REIT’s 3rd Quarter Update for FY2019/20 – A Summary and My Thoughts (Guest Post)

Time flies, the first half of 2020 is beyond us. We’re now into the second half of the year. Hope you’ve had a great one so far. Starting July till the end of August, as investors, we can look forward to another round of updates by Singapore-listed companies, with most of them reporting their performances for the first half of the year ended 30 June 2020.

SPH Reit to extend reliefs for tenants; SPH allows students in UK ...

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with username known as ljunyuan and has 1241  followers.

SPH REIT (SGX:SK6U) provided a business update for the third quarter ended 31 May 2020 (the REIT has a financial year ended 30 August 2020), and as a unitholder, I went through the REIT’s presentation slides to learn about the latest updates.

In the REIT’s latest updates, there weren’t any financial statistics being reported. They only provided updates on its portfolio occupancy and debt profile, along with distribution for the quarter, all of which you can find below (with my personal thoughts to share):

Portfolio Occupancy Profile

The following are some of the REIT’s portfolio occupancy profile for the quarter under review:

    • Overall portfolio occupancy rate: 98.8% (vs. 98.9% recorded in 2Q FY2019/20 ended 28 February 2020)
    • Weighted average lease expiry (WALE) by net lettable area and gross rental income: 4.1 years and 2.6 years respectively
    • As far as the percentage of leases that will be expiring in the remainder of the current financial year, it is about 1% for its Singapore portfolio, and 25% for its Australia portfolio
    • In terms of footfall to the REIT’s retail malls, its Singapore malls recorded a decline compared to a year ago, which wasn’t unexpected in my personal opinion as the quarter under review (period between 01 March 2020 and 31 May 2020) encompasses the two-month circuit breaker period implemented by the Singapore government to contain the community spread of Covid-19, where most retail shops had to temporarily close; as far as footfall to the REIT’s Australia malls are concerned, Figtree Grove saw the same amount of footfall compared to the same period last year, while Westfield Marion saw a 37.5% drop in its footfall when compared against the same period last year

My Personal Thoughts: There weren’t any rental reversions provided in its update this time round. As for the renewal of expiring leases is concerned, for its Singapore portfolio, I note that only 1% of its leases in Paragon are set to expire in the remainder of the current financial year, but in Australia, about a quarter of leases are set to expire in the same time period. It’ll be interesting to see if they are able to renew the expiring leases at a positive rental reversion.

Debt Profile

The following are some of the REIT’s debt profile reported in the third quarter of the financial year ended 31 May 2020:

    • Weighted average term to debt maturity: 2.0 years (vs. 2.2 years as at 2Q FY2019/20)
    • Average cost of debt: 2.79% (vs. 2.83% as at 2Q FY2019/20)

My Personal Thoughts: The REIT did not provide its aggregate leverage as at the end of the 3rd quarter, but its good to note that, compared to the previous quarter, its average cost of debt have come down.

Assistance Provided in Light of Covid-19

    • Singapore: The REIT is committed to pass on reliefs provided by the Singapore government to eligible tenants in full
    • Australia: The REIT is working with its joint venture partners to roll out targeted assistance on a tenant-by-tenant basis

Distribution Payout to Unitholders

    • Distribution Per Unit: S$0.005/unit (vs. S$0.0139 in 3Q FY2018/19)
    • Ex-date: 08 July 2020
    • Record date: 09 July 2020
    • Payout Date: 18 August 2020

My Personal Thoughts: While on a year-on-year basis, the payout saw a 64.0% drop, but compared to the previous quarter (i.e. 2Q FY2019/20) which was S$0.003/unit, there was a marginal increase. Personally, I felt that the year-on-year drop in terms of its distribution payout per unit was within my expectations, in light of the huge headwinds posed by Covid-19 to the retail malls.

Documents to Download

Disclaimer: At the time of writing, I am a unitholder of SPH REIT.
$SPHREIT(SK6U.SI)

Once again, this article is a guest post and was originally posted on ljunyuans profile on InvestingNote. 

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