facebookSPH REIT (SGX: SK6U) Latest FY2020 Earnings: How Did the Retail REIT Perform Amid the Pandemic?


SPH REIT (SGX: SK6U) Latest FY2020 Earnings: How Did the Retail REIT Perform Amid the Pandemic?

profileSudhan P

SPH REIT (SGX: SK6U), a retail real estate investment trust (REIT), kick-started Singapore’s latest earnings season on 6 October.

For its second-quarter results announced in April, SPH REIT set the tone by becoming the first Singapore REIT to announce that it will retain a large chunk of its distributable income due to headwinds brought about by COVID-19.

Following that, many REITs retained their distribution and the Monetary Authority of Singapore (MAS) and relevant authorities made it official to allow REITs to defer their distributable income and still enjoy the tax transparency treatment.

In this latest period, investors could be watching to see if the retail REIT’s Singapore business has recovered with the start of Phase 2 on 19 June. A recovery could give some clues to the financial performance of other Singapore retail REITs. 

With that, let’s dive into SPH REIT’s earnings for the financial year ended 31 August 2020 (FY2020).

(For those who want a primer on the different REIT terms to be used here, you can check out our REIT cheat sheet.)

TL;DR: SPH REIT FY2020 Financial Performance 

Here are some highlights from SPH REIT’s latest financial year:

  • Gross revenue up 5.6% year-on-year to S$241.5 million.
  • Net property income grew 1.2% to S$181.9 million.
  • But income available for distribution tumbled 36.4% and distribution per unit (DPU) plunged 51.4% to 2.72 Singapore cents.
  • The latest DPU translates to a distribution yield of 3.1%, based on the closing price on 31 August 2020 of S$0.87 per unit.

Financial Highlights 

COVID-19 took a toll on SPH REIT’s business.

For FY2020, gross revenue grew 5.6% year-on-year to S$241.5 million. But on a deeper look, the increase was due to contributions from newly acquired assets in Australia, which more than offset the lower contributions from the Singapore assets.

SPH REIT performed well for the first half ended 29 February 2020 (1H FY2020), with gross revenue rising by 19.2% to S$133.4 million. However, COVID-19 impacted the REIT’s performance in the second half of FY2020 where gross revenue tumbled 7.4% to S$108.1 million.

Even though property operating expenses increased in FY2020, the REIT managed to eke out a net property income (NPI) gain of 1.2% to S$181.9 million.

The REIT said that NPI for its Singapore assets was hit by COVID-19 rental relief granted to eligible tenants, which amounted to S$31.8 million.

Source: SPH REIT earnings presentation

Since the COVID-19 situation is still evolving and “there is no certainty as to when normalcy will return”, the REIT’s manager has decided to defer distribution of S$14.5 million to be financially prudent. 

Distribution per unit (DPU) of 0.52 cents, a part of FY2020 income, will be deferred to FY2021, which is allowed under the relaxed regulations for Singapore REITs to cope with the pandemic.

In all, FY2020 DPU fell around 51% to 2.72 Singapore cents, down from 5.60 cents a year ago.

Source: SPH REIT earnings presentation

Despite the challenging operating conditions, SPH REIT’s portfolio occupancy was a healthy 97.7%, as of 31 August 2020.

The REIT also had a positive portfolio committed rental reversion of 5.9% for FY2020, mainly from renewed or new leases for the Singapore assets committed before the start of COVID-19.

In terms of balance sheet strength, the REIT had a gearing ratio of 30.5%, well within the previous regulatory limit of 45%.

SPH REIT also no refinancing needs until June 2021.

Source: SPH REIT earnings presentation


SPH REIT said that its focus for FY2021 is to minimise vacancies and provide sustainable rental income.

It added that it’s committed to supporting tenants through the current challenging climate, so as to “position the assets to be ready to capture the business opportunities when recovery begins”.

Tenant sales for SPH REIT’s Australia assets in July and August 2020 have seen encouraging recovery. While the REIT didn’t provide any update for the Singapore assets, we can take some clues from official government data released earlier this week. 

Total retail sales here for August 2020 fell 5.7% year-on-year but this is an improvement from the decline of 8.5% in July 2020

It could be some time before full retail recovery takes place though.

Over the longer term, SPH REIT has a right of first refusal (ROFR) on The Seletar Mall, a retail mall owned by its sponsor Singapore Press Holdings Limited (SGX: T39). The REIT also has a ROFR on The Woodleigh Mall, which is under construction now. 

The ROFR agreement allows SPH REIT to get first dibs on the properties before anyone else can.

At SPH REIT’s unit price of S$0.88, it has a price-to-book ratio of 0.97x and a distribution yield of 3.1%. 

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Stock Discussion on SPH REIT

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 


About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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