SPH REIT (SGX: SK6U) is a retail REIT with a portfolio of four retail properties in Singapore and Australia. The portfolio comprises Paragon Mall, The Clementi Mall, and The Rail Mall in Singapore, all of which are valued at S$3.37 billion as of 31 August 2018. In Australia, SPH REIT owns an 85% stake in Figtree Grove Shopping Centre in Wollongong, New South Wales, which is valued at around 206 million Australian dollars as of October 2018.
Investors who are looking for a solid and steady retail REIT should definitely consider SPH REIT. Though it may be concerning that the REIT only owns four properties (and hence lacks sufficient diversification), this is mitigated by other attractive attributes. Here are four compelling reasons SPH REIT makes an excellent investment choice.
1. Strong sponsor
SPH REIT’s sponsor is none other than Singapore Press Holdings Ltd (SGX: T39), Asia’s leading media organisation whose core business is in the publishing of newspapers, magazines, and books in print and digital format. SPH owns a 70% stake in SPH REIT and is also the REIT’s manager through its wholly-owned subsidiary SPH REIT Management Pte Ltd. SPH was incorporated in 1984 and has a leading reputation for being a progressive media conglomerate.
2. Steadily rising dividends
Source: SPH REIT Annual Report 2018
The five-year dividend trend for SPH REIT shows steadily rising annual dividends, beginning with 5.43 Singapore cents in FY 2014 (the REIT has a 31 August year-end) and ending with 5.54 Singapore cents in FY 2018. The consistency of the dividends over the years will allow investors to have a good night’s sleep, as the REIT owns a quality portfolio of assets that generate recurring rental income.
For Q3 FY 2019, SPH REIT reported a distribution per unit (DPU) of 1.39 Singapore cents. The trailing-12-month DPU for the REIT is 5.57 Singapore cents, which translates to a historical dividend yield of 5.3% based on the last traded price of S$1.06.
3. High occupancy
As of 31 May 2019, SPH REIT’s portfolio enjoyed 99.0% committed occupancy by net lettable area. Such high occupancy rates are a positive for investors as they underpin the DPU flow and allow consistency of rental income to flow into the REIT.
4. Positive rental reversion
For the year ended 31 May 2019, SPH REIT reported overall portfolio rental reversion of 8.4%. Paragon recorded rental reversion of 8.6%, while Clementi Mall and Rail Mall recorded positive reversions of 5.8% and 9.1%, respectively. Another piece of good news is that tenant sales have registered growth, with visitor traffic up 4.4% year on year for Q3 2019, which bolsters these tenants’ ability to be able to continue paying their rentals and will also encourage tenants whose leases are expiring to renew them again.
A sweet deal for investors
The above four traits represent a sweet deal for investors, as they provide certainty and peace of mind for investors receiving the company’s distributions. SPH REIT offers exposure to retail assets in two countries and is also backed by a strong, reputable sponsor. It should be clear why the REIT qualifies as an excellent investment, as it has strong fundamentals and a great track record.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.
Motley Fool Singapore 2019