SPH REIT’s Latest Earnings: What Investors Should Know
- Original Post from The Motley Fool Sg

SPH REIT (SGX: SK6U) is a retail real estate investment trust (REIT) that has interests in Paragon and The Clementi Mall. The REIT’s sponsor is media giant, Singapore Press Holdings Limited (SGX: T39).
Yesterday, SPH REIT announced its financial results for the year ended 31 August 2017 (FY2017). The reporting period was from 1 September 2016 to 31 August 2017.
Here’s a quick rundown on the financial figures from the earnings release:
1. Gross revenue for FY2017 grew 1.5% year-on-year to S$212.8 million, due to higher rental income.
2. Net property income (NPI) increased 4.5% to S$168.1 million, largely on the back of better cost controls.
3. FY2017’s distribution per unit (DPU) came in at 5.53 cents, edging up from 5.50 cents seen a year back.
4. The net asset value (NAV) per unit was at S$0.95, as at 31 August 2017. This is a slight increase from FY2016’s figure of S$0.94.
Both Paragon and The Clementi Mall continued having 100% occupancy despite the muted retail environment. Rental reversion for the portfolio was at a commendable 1.2% for new and renewed leases in FY2017.
It was a mixed bag, however, if we home in on the individual properties in the portfolio.
Rental reversion at Paragon was down 0.8%. Its visitor traffic was maintained at 18.3 million while tenant sales grew by 2.1% to S$675 million. The occupancy cost was at 19.6%.
Over at The Clementi Mall, it had a positive rental reversion of 3.7%. Visitor traffic fell 0.3% to 29.9 million while tenant sales declined by 5.8% to S$225 million. The occupancy cost came in at 15.8%.
As at 31 August 2017, the trust had a gearing ratio of 25.4%, with an average cost of debt at 2.82%. 85.9% of the S$850m debt facility was on a fixed rate basis, helping to mitigate the risks from interest rate rises in the future. The weighted average term to maturity of the outstanding debt is at 2.1 years.
Looking ahead, Susan Leng, Chief Executive Officer of the REIT’s manager, said:
“[W]e will continue to invest in asset enhancement to remain relevant and improve shopper experience. During the year, Paragon commenced the second phase of its Air Handling Units decanting project involving the creation of additional lettable area at higher-yielding retail space. This project is expected to be completed by mid-2018.
Concurrently, other opportunities to create value have been identified and details of these projects in the pipeline would be released at the appropriate time.
Barring any unforeseen circumstances, SPH REIT’s two high quality and well-positioned retail properties in prime locations are expected to remain steady and resilient.”
The Seletar Mall, which opened in November 2014, could be a potential acquisition target for SPH REIT. Singapore Press Holdings has given the right of first refusal to the REIT to acquire the property, which has a high occupancy rate since starting business.
SPH REIT ended Monday at S$1.005. This gives a historical price-to-book ratio of 1.06 and a trailing yield of 5.5%.
$SPHREIT(SK6U.SI) $SPH(T39.SI)

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2 Things That Investors Should Know About SPH REIT Right Now
- Original Post from The Motley Fool Sg

SPH REIT (SGX: SK6U) is an owner of two retail malls in Singapore, namely, Paragon and The Clementi Mall. Singapore Press Holdings Limited (SGX: T39) is both the sponsor and main unitholder of the REIT.
In this article, let’s look at two things to know about the REIT right now: its latest financial performance and the valuation.
Financial performance
Below is a table showing important items from SPH REIT’s financial results for the second quarter of financial year ending 31 August 2018.

Source: SPH REIT Results Presentation
The above is a slide from SPH REIT’s latest results presentation.
The REIT’s net property income (NPI) fell from S$42.7 million a year ago to S$42.3 million in the latest quarter. The year-on-year decline in NPI was due to the impact from Paragon. The development saw a rental reversion of -7.1% for new and renewed leases for the second quarter. The REIT said the lower rental reversion at Paragon was “mainly due to negotiations during the retail sales downturn since 2014”.
As at 28 February 2018, the retail REIT clocked in a gearing ratio of 25.4%, unchanged from that on 31 August 2017. The weighted average term to maturity was 2.2 years, and the average cost of debt came in at 2.84% per annum.
In all, SPH REIT achieved a stable performance for the quarter.
Valuation
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows SPH REIT’s PB ratio and distribution yield. It also shows the respective averages of the two valuation metrics for the 41 REITs that are listed in Singapore’s stock market.

Source: SGX StockFacts (data as of 13 April 2018)
With a PB ratio of 1.04 and a distribution yield of 5.6%, we can see that SPH REIT’s valuation is higher than the market average.
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2 Things That Investors Should Know About SPH REIT Right Now
- Original Post from The Motley Fool Sg

SPH REIT (SGX: SK6U) is an owner of two retail malls in Singapore, namely, Paragon and The Clementi Mall. Singapore Press Holdings Limited (SGX: T39) is both the sponsor and main unitholder of the REIT.
In this article, let’s look at two things to know about the REIT right now: its latest financial performance and the valuation.
Financial performance
Below is a table showing important items from SPH REIT’s financial results for the second quarter of financial year ending 31 August 2018.

Source: SPH REIT Results Presentation
The above is a slide from SPH REIT’s latest results presentation.
The REIT’s net property income (NPI) fell from S$42.7 million a year ago to S$42.3 million in the latest quarter. The year-on-year decline in NPI was due to the impact from Paragon. The development saw a rental reversion of -7.1% for new and renewed leases for the second quarter. The REIT said the lower rental reversion at Paragon was “mainly due to negotiations during the retail sales downturn since 2014”.
As at 28 February 2018, the retail REIT clocked in a gearing ratio of 25.4%, unchanged from that on 31 August 2017. The weighted average term to maturity was 2.2 years, and the average cost of debt came in at 2.84% per annum.
In all, SPH REIT achieved a stable performance for the quarter.
Valuation
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows SPH REIT’s PB ratio and distribution yield. It also shows the respective averages of the two valuation metrics for the 41 REITs that are listed in Singapore’s stock market.

Source: SGX StockFacts (data as of 13 April 2018)
With a PB ratio of 1.04 and a distribution yield of 5.6%, we can see that SPH REIT’s valuation is higher than the market average.
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Are REITs Worth Considering When Rates Rise?
- Original Post from The Motley Fool Sg

With interest rates on the way up, an argument can be made for avoiding Real Estate Investment Trusts or REITs. After all, why choose a distribution that is not certain, when it is possible to get a guaranteed return from money in the bank.
Right now, it is possible to earn around 1% on US dollar deposits. And if market estimates are right, another six interest rate hikes by the end of 2019 could lift deposit rates to 2.5%.
But that would still be less than the average yields on Singapore and Malaysian REITs of about 6%, even though their pay outs could be risker. Question is whether the premium is worth the risk?
Non-discretionary income
Before we address that question, it is worth bearing in mind that REITs must pay out 90% of their income to investors, regardless.
The distribution is not discretionary. If the REIT makes money, then it must pay out most of it to unitholders, if it wants to enjoy a favourable tax status.
Secondly, REITs have often been viewed as a proxy for bonds. But unlike bond prices, the share price of REITs doesn’t necessarily fall when interest rates rise. So, we shouldn’t assume that all REITs could be adversely affected by rising interest rates.
In fact, a REIT’s performance is influenced by two factors, namely, the prevailing credit conditions and the state of the economy. If either the economy is doing well, or credit is readily available, then REITs should perform well too.
So, unit holders could continue to receive uninterrupted distributions. But it is important to choose the right REITs – not just the one with the highest yield.
Misleading valuations
One way to evaluate REITs is to look at how much we are paying for every dollar of profit they make. With shares, the price-to-earnings can be helpful. But with REITs the P/E ratio can be almost useless.
Cash is probably more relevant than earnings, which tend to be complicated by accounting rules that require REITs to depreciate their properties.
Property values tend to rise over time, rather than fall. But general accounting rules require properties to be depreciated over their lifetime. So, the reported profit number could underestimate the “true” profit. REITs also tend to hang on to their properties for ages.
These assets are carefully chosen to generate long-term income. In fact, we should probably run a mile, if a REIT buys and sells its buildings too frequently.
Consequently, Funds from Operation (FFO) can be a better gauge of profit. It adjusts for depreciation, amortisation, and any gains or losses from property disposals.
Currently, the median Price-to-FFO for Singapore and Malaysian REITs is a high, but not-too-demanding 17. It means that we are paying around $17 for every dollar of cash generated. Hektar (KLSE: 5121.KL) is valued at 14 times Funds from Operation, while Frasers Hospitality Trust (SGX: ACV) is valued 20 times.
Almonds and pistachios
A common problem with comparing different REITs is that it can be a bit like pitting almonds against pistachios. That’s nuts.
How do we compare, say, a REIT with prime properties in the Central Business District with another that owns a portfolio of suburban malls?
One useful way is to look at their capitalisation rates. It is a measure of the annual rental income that REITs generate from their properties.
Currently, the median capitalisation rate for Singapore and Malaysian REITs is around 5.3%. It means that they could generate roughly $5.30 of rental income from every $100 of property assets. SPH REIT (SGX: SK6U) sports a cap rate of 5.2%, while AIMS AMP (SGX: O5RU) has a cap rate of 6%.
A high capitalisation rate is not necessarily better. It could mean that a landlord is charging too much rent, which might not be sustainable over the long haul.
By the book
Finally, we should never lose sight that REITs are property assets. So we should consider carefully how much we are paying for every dollar of their net assets.
One way is to look at their book values. Since the properties held by REITs are appraised regularly, the book value should provide a reasonable gauge.
Currently, Singapore and Malaysian REITs are, on average, trading at around their book values, though some are trading at quite a hefty premium.
Fortune REIT (SGX: F25U) is valued at about 0.7 times book value, while Keppel DC REIT (SGX: AJBU) is valued at a 50% premium.
With more than 50 REITs listed on the Singapore and Malaysian market, investors are spoilt for choice. That can be both a blessing and a curse.
Choice is never a bad thing. Some REITs can be quite outstanding, some are mediocre, while some could disappoint. So, choosing the right ones for our portfolios is crucial.
Focussing on yields may provide us with instant gratification. But for long-term investors, considering the sustainability of distributions can be more satisfying over the long haul.
A version of this article first appeared in the Business Times.
$Frasers HTrust(ACV.SI) $Keppel DC Reit(AJBU.SI) $Fortune Reit HKD(F25U.SI) $AIMSAMP Cap Reit(O5RU.SI) $SPHREIT(SK6U.SI)

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3 Things You Need to Know About the Singapore Stock Market Today
- Original Post from The Motley Fool Sg

Hello, everyone. Here are three things about the local stock market that you might be interested in today.
1. The Straits Times Index (SGX: ^STI) ended Monday at 3,449.96 points, up 0.2% or 7.46 points.
Among the 30 index constituents, the blue-chip that rose the most was Jardine Cycle & Carriage Ltd (SGX: C07). The conglomerate’s shares increased 2.8% to S$35.50.
On the other hand, telco StarHub Ltd (SGX: CC3) fared the worst among the 30-stock index, with its shares slumping 2.1% to S$2.28. The firm is currently trading close to its 52-week low price of S$2.26.
2. ComfortDelGro Corporation Ltd (SGX: C52), which ended the day unchanged at S$2.08 per share, announced earlier today that it is expanding into Australia’s non-emergency patient transportation space. It is doing so by acquiring all the shares in National Patient Transport Pty Ltd (NPT), one of the largest private providers of non-emergency patient transport services in the country.
The acquisition, subject to regulatory approval, is for A$30 million (around S$30.2 million) and will be funded from ComfortDelGro’s internal funds.
NPT operates in Victoria, New South Wales and Western Australia, three states where ComfortDelGro has an entrenched presence. The firm “offers a range of healthcare transport services to major metropolitan hospital networks including walker, hoist and stretcher transport services and specialist services for high acuity and complex patients”. NPT also runs “a registered training organisation that is qualified to deliver and assess a range of non-emergency healthcare transport, first aid and resuscitation courses in Australia”.
Yang Ban Seng, managing director and group chief executive of ComfortDelGro, said:
“This is an exciting opportunity for us to expand into an adjacent area of land transport services. It enables us to leverage on our core capabilities in contract, fleet and manpower management whilst broadening our breadth of skills. The non-emergency patient transport business is experiencing strong growth and one that shows great potential with ageing populations in much of the developed world. With this acquisition, we will be able to use our newly acquired skills set to explore similar opportunities in other geographies.”
3. The earnings season has started again with SPH REIT (SGX: SK6U) reporting its second-quarter results on Friday after market close.
For the three months ended 28 February 2018, gross revenue decreased 0.8% year-on-year to S$53.6 million while net property income came down 1.1% to S$42.3 million. However, distribution per unit held steady at 1.40 Singapore cents. To know more about the earnings, you can check out the coverage here.
Units of SPH REIT ended Monday flat at S$1.00.
$STI(^STI.IN) $Jardine C&C(C07.SI) $ComfortDelGro(C52.SI) $StarHub(CC3.SI) $SPHREIT(SK6U.SI)

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10 Things Investors Should Know About SPH REIT’s Second Quarter Earnings
- Original Post from The Motley Fool Sg

SPH REIT (SGX: SK6U) is a retail real estate investment trust (REIT) that has interests in Paragon and The Clementi Mall. The REIT’s sponsor is media giant, Singapore Press Holdings Limited (SGX: T39).
Last Friday, SPH REIT announced its financial results for the second quarter ended 28 February 2018. Here are 10 things investors should know from the earnings announcement:
1. Gross revenue for the latest quarter slipped 0.8% year-on-year to S$53.6 million on the back of lower rental income at Paragon.
2. Net property income fell 1.1% to S$42.3 million mainly due to the impact from Paragon.
3. Income available for distribution tumbled 3.3% to S$36.1 million.
4. However, distribution to unitholders inched up 0.6% to S$35.9 million, and distribution per unit was steady at 1.40 Singapore cents.
5. The net asset value per unit came in at S$0.94 for the quarter, a fall from S$0.95 at the end of August 2017.
6. As at 28 February 2018, the retail REIT clocked in a gearing ratio of 25.4%, unchanged from that on 31 August 2017. The weighted average term to maturity was 2.2 years, and the average cost of debt came in at 2.84% per annum.
7. The rental reversion for the overall portfolio was a negative 1%. Paragon saw a rental reversion of -7.1% for new and renewed leases for the second quarter. The REIT said the lower rental reversion at Paragon was “mainly due to negotiations during the retail sales downturn since 2014”. Meanwhile, The Clementi Mall, which had three tenancy changes, recorded a 2.5% fall in rental rates.
8. The weighted average lease expiry by gross rental income and net lettable area was 2.1 years, as at 28 February 2018.
9. Both Paragon and The Clementi Mall saw growth in tenant sales even though visitor traffic held steady. The REIT said that the higher tenant sales were in line with the recent recovery in retail sales since June 2017. The retail sales index (excluding motor vehicles) increased by 2.5% year-on-year in the 2017 second quarter (Q2 2017), 2.4% in Q3 2017 and 1.2% in Q4 2017. Both properties have full occupancy.
10. The chief executive of the REIT’s manager, Susan Leng, commented on the REIT’s latest performance and its outlook:
“SPH REIT has delivered stable distribution and our well-positioned malls continued their track record of full occupancy. In keeping with our philosophy of treating tenants as business partners, we will work closely with them to ride through both cyclical and structural challenges in the retail environment. It is encouraging that our tenant sales have continued to register growth. The tourist arrivals and spend for 2017 ended on a positive note and we believe Paragon would stand to benefit with this trend. The forecasted GDP growth of “1.5% to 3.5%” bodes well for Singaporeans and The Clementi Mall is well poised in the suburban to continue to serve its immediate catchment. Our focus remains to drive long-term value of our properties and deliver sustainable returns for our unitholders.”
The REIT’s units closed at S$1.00 on Friday, giving a price-to-book ratio of 1.06 and a trailing distribution yield of 5.5%.
$SPHREIT(SK6U.SI) $SPH(T39.SI)

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