SPH REIT

SPH REIT: ($1.06) 4QFY14 results beat IPO forecasts SPH REIT's 4QFY14 distributable income and DPU of $34.9m and 1.39¢ beat IPO forecasts by 7%, attributed to positive rental reversions and savings in trust expenses. Gross revenue and net property income of $51.1m and $38m were 2.6% and 5.6% higher than expected, buoyed by rental reversion at Paragon (+10.5%) and The Clementi Mall (+5.5%), as well as lower-than-expected operating costs. While shopper traffic held steady in FY14, overall tenant sales fell 4.2%, impacted by the weak retail sentiments and a decline in tourist arrivals. Both malls are fully occupied, with average lease expiry of 2.2 years by net lettable area (NLA). Aggregate leverage for the REIT stood at 26%, with average debt term of 4 years and overall interest cost of 2.33%. Three minor asset enhancement projects are ongoing, expected to increase NLA by 10,000 sf or 1.1% of overall portfolio, with these new spaces phasing in from FY16. As a reminder, SPH has the right of first refusal for The Seletar Mall, which is slated for completion in Dec ’14. At $1.06, SPH REIT is priced at 1.1x P/B and has forward yield of 5.3%, compared to Singapore retail landlords' average of 6.1%. Latest broker ratings: CIMB maintains Hold rating with TP of $1.09