SPH Reit's Q2 DPU up 0.7% at 1.4 S'pore cents

Singapore

SPH Reit raised its distribution per unit by 0.7 per cent to 1.4 Singapore cents for its second fiscal quarter as rental income increased at its two retail properties.

Gross revenue at the retail real estate investment trust improved 2.8 per cent year-on-year to S$52.5 million in the three months ended Feb 28. Net property income rose 3.7 per cent to S$40.3 million.

Income available for distribution ascended 4 per cent to S$36.3 million. "For 2Q 2015, SPH Reit had retained S$1.0 million of taxable income available for distribution, for future distribution to unitholders," said the Reit.

Following the latest quarter, SPH Reit's distribution per unit for the six months to February stood at 2.73 Singapore cents, up 1.5 per cent year-on-year. Gross revenue for the first fiscal half rose 2.3 per cent to S$103.1 million, while net property income increased 4.3 per cent to S$78.1 million.

Rental income rose during the second quarter at Paragon and The Clementi Mall, SPH Reit's two properties. Both malls are fully leased.

Paragon managed to raise rents by 11.6 per cent for new or renewed leases in the first half, while The Clementi Mall saw an 8.8 per cent negative rental reversion on 2 per cent of total net lettable area because of "fine-tuning of tenancies to strengthen the offering to a wider base of shoppers", SPH Reit said.

"Several new-to-market international brands were introduced in Paragon to enhance its premier positioning and refresh the offering to shoppers," Susan Leng, chief executive of SPH Reit Management, said in a statement. "The Clementi Mall continues to enjoy strong visitorship and is well-positioned as a necessity mall in an established population catchment area. Barring any unforeseen circumstances, the two retail properties are expected to remain resilient and turn in a steady performance."

The trust's gearing level was 26 per cent, unchanged from Aug 31, 2014. The weighted average term to maturity of SPH Reit's existing debt is 3.5 years. That comes from S$850 million of debt, of which S$465 million, or 54.7 per cent, carry fixed interest rates.

Looking ahead, SPH Reit noted a "challenging retail environment", citing a softer global economic outlook, tight labour conditions and weaker tourist arrival numbers.

Analyst Joshua Tan of Maybank Kim Eng echoed those sentiments. He told The Business Times that he was "underweight" on the retail Reit sector.

Mr Tan said that tourist arrivals have been disappointing, and domestic income growth is "tracking the low trend" with a possible GDP downgrade in 2015. The labour crunch facing retailers is also limiting expansion plans by tenants.

"It's a confluence of both factors," Mr Tan said.

SPH Reit closed trading on Monday unchanged at S$1.065.