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SPH REIT’s DPU Beats Expectations!
Tradeable, Tradeable Ideas | 17 July 2014
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By: Raymond Leung
Articles (142) Profile
  1. SPH REIT’s financial results were slightly above expectations. Gross revenue stood at $50.4 million, while distribution per unit stood at 1.35 cents.
  2. SPH REIT’s debt profile show a relatively even spilt between fixed and floating rate debts.
  3. However, majority of floating rate debts need to be refinanced in 2016, a possible period of rising interest rates.

In its 3Q14, SPHREIT announced its recent financial results which were slightly above previous forecasts. Gross revenue for the trust came within forecast at $50.4 million.

Property expense of SPHREIT was 6.9 percent lower than the forecasted figure in the prospectus. This allowed net property income of the trust to increase by 2.7 percent from the forecasted $36.7 million to the actual $37.7 million. Distribution per unit grew 3.1 percent to 1.35 cents in comparison to 1.31 cents projected in the prospectus.

Net asset value of the trust now stands at $0.90 which is one cent higher than the forecast. However, gearing for the trust remains low at 26.9 percent compared to the forecasted 27.3 percent. This will give the trust some headroom to take on more debt for future property acquisitions.

Debt maturity of the REIT is spread evenly over three years namely 2016, 2018 and 2020. 54.7 percent of SPHREIT’s debts were contracted at fixed interest rates while the remaining were contract at floating interest rates. Most of these floating rate debt will require refinancing in 2016.

Source: SPH REIT, chart on SPH REIT's debt maturity profile

Both of the properties under SPHREIT are currently running at 100 percent occupancies and have enjoyed higher rental reversion. Year to date, Paragon has a higher rental reversion of 11.5 percent while Clementi Mall has a positive rental reversion of 5 percent.

The Seletar Mall, one of the properties that are under the SPHREIT’s sponsor is expected to be completed by December 2014. The trust currently has the Right of First Refusal for the new mall which SPHREIT have ample gearing room for.

Looking forward, SPHREIT is expected to continue to perform within its forecasts with modest growth. The upside for the REIT might come from the acquisition of a new property such as The Seletar mall.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

SPH REIT  1.070 -- --   
Business: S'pore-based REIT with a portfolio of assets primarily for retail purposes in Asia-Pacific.

Insight: Apr-19, 1H19 gross revenue rose 4.5% to $111.9m du... Read More


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