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Done by: Kevin Yee
Done by: Kevin Yee
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Contents
Company Background 1
Market Review & Growth Drivers 2
Valuation Model
3 Debt Analysis
4
6 Summary
Peer Comparison 5
Company Background
SPH REIT is a Singapore-based REIT established
principally to invest, in a portfolio of income-producing
real estate which is used primarily for retail purposes in
Asia-Pacific
Key objective is to provide Unit holders with regular and
stable distributions, and sustainable long-term growth in
DPU and NAV.
SPH REIT is managed by SPH REIT Management Pte.
Ltd., which is a wholly-owned subsidiary of Singapore
Press Holdings Limited.
Source: Company Report
Company Background
Initial portfolio consist of 2 well located commercial
properties in Singapore totaling 898,779 sq ft of NLA
with an appraised value of S$3,070 mill
Committed occupancy of 100% as of 28 Feb 2013
Sponsor’s (SPH) committed to retain 70% stake in SPH
REIT – interest aligned with unit holders
Source: Company Report
Cornerstone Investors (no lock-up)
GE Life Assurance
Hong Leong Asset Management
Morgan Stanley Investment Management
Newton Investment Management
Norges Bank
Offering
Institutional tranche: 42x oversubscribed
Public tranche: 25x oversubscribed
Source: Company Report
Company Background
SPH REIT Structure
Revenue Breakdown
Source: Company Report
Gross Revenue
Breakdown
Net Property Income
Breakdown
Valuation
Breakdown
Paragon
99 year leasehold from listing
date
High end luxury retail mall &
medical suite/office space
High end families with its kids
offerings
Located beside to Mount
Elizabeth Hospital
Wide range of F&B
Retail: 483,690 sq ft of NLA
Medical/Office:
223,000 sq ft of NLA
(contributes 25%) Source: Company Report
Paragon
Source: Company Report
Paragon
Source: UOB KayHin
Comparison of Mall
Retail Rental
Tenancy Composition
Clementi Mall
Source: Company Report
99 year leasehold from Aug
2010
Mid-Market suburban mall
located in the centre of
Clementi Town
Direct linkage to the
Clementi MRT & bus
interchange
Draws tertiary students
(NUS, NP, SP)
Retail: 192,089 sq ft of NLA
Clementi Mall
Source: Company Report
Clementi Mall
Source: UOB KayHin
Rentals are under rented
About 13% below
comparable malls with similar
footfalls
Income support of up to
SGD20m over 5 years (to
support NPI at SGD31m per
year)
Market Review
Source: Company Report
Completion of: ION Orchard (2009)
Orchard Central (2010)
313@Somerset (2010)
Market Review
Source: Urbis Report (Independent Retail Property Market Research)
Market Review
Source: Urbis Report (Independent Retail Property Market Research)
Market Review
Source: Urbis Report (Independent Retail Property Market Research)
Singapore medical tourism market expected
to grow at a CAGR of 8.3% (2011 – 2018)
Growth Driver
Source: Company Report
Proactive asset enhancement strategy
Investment & Acquisition growth strategy
The Seletar Mall
Low occupancy cost ratio (14.6%) compared to CapitalMall
Trust (16.1%)
Gross rental income consist of Fixed & Turnover Rent
Fixed Rent:
Base rent
Service, maintenance & promotion fees
Turnover Rent:
Percentage of a tenant’s gross revenue
2% for Paragon & 3.3% for Clementi Mall (estimated)
Debt Analysis
Source: Company Report
Conservative Capital Structure
Staggered loan maturities of 3, 5 & 7 years terms upon listing
Gearing ration of 27.3% (max is 35% without credit rating)
Debt headroom of SGD370m
Interest coverage ratio of 6.35 (FY13E) (Industry average: 3.28)
Low all-in financing cost of 2.35%
Risk Factors
Overly reliant on Paragon
Income support will be exhausted by FY2015
Increased competition from other properties for tenants
and customers
Smaller developmental pipeline as compared with
other retail SREITs
No planned near term AEI (Paragon completed in
2009, Clementi begun operations in 2011)
Rising interest rates will impact financing cost
Risk Factors
Source: UOB KayHin
Potential Property Pipeline for Retail SREITs
Trading Data
Source: Reuters
52 week range $0.98 - $1.00
Market Capitalization $2.46 B
Share Outstanding 2,501 M
Average Daily Volume (3 mth) 2.54 M
Valuation
Use Dividend Discount Model (DDM)
Valuation – Financial Forecast
Fiscal Period (‘000) FY2011 FY2012 FY2013E FY2014E FY2015E
Gross Revenue 162,740 187,761 194,285 201,442 207,485
Net property income 120,293 137,615 141,916 146,674 151,074
Income available for
distribution 92,248 115,900 131,142 118,518
DPU (cents) 4.63 5.21 4.71
Dividend Yield % (at
$0.98) 4.72 5.32 4.80
Note: Distribution from FY 2015 is 90%
Valuation Calculation
Long Term Growth Rate (g) 3.0%
Risk Free Rate (RFR) 2.5%
Beta 0.81
Equity Risk Premium (ERP) 7.5%
Cost of Equity (Ke) 8.575% RFR + Beta * ERP
(Cents) FY13F FY14F FY15F Terminal
DPU 4.63 5.21 4.71 86.971
FY16F DPU
NPV $0.80 (Ke-g)
(Fair Value) = 4.71(1.03)
(8.575% - 3.0%)
Peer Comparison
Name
DPU
(cents) Price Yield (%)
NAV
(M) Gearing (%)
Asset
Type
SPH REIT
2.51 (2H
FY13E) 0.99 5.10 0.89 27.3 Retail
CapitalMall 2.53 2.02 5.03 1.68 34.9
Retail +
Office
Starhill Gbl 1.19 0.82 5.85 0.88 30.3
Retail +
Office
MapletreeCom 1.75 1.17 6.02 1.07 40.8
Retail +
Office
SuntecReit 2.25 1.58 5.73 2.04 36.5
Retail +
Office
Source: reitdata.com Average comparable peer yield: 5.91%
Future Direction
The Seletar Mall
due to complete in Dec 2014
Management states they will buy after stabilization phase
(2 years)
NLA of 192,000 sq ft (same size as Clementi Mall)
focus on mid-tier customer market (providing entertainment,
accessible needs and F&B)
No immediate plans to grow overseas
Plan to convert office space to medical suites
Source: Company Report & Urbis Report (Independent Retail Property Market Research)
Conclusion
Source: Company Report
Low gearing ratio
Low financing cost
Strong interest coverage ratio
Unique location – close to Mount Elizabeth Hospital
Room to increase base rent
Limited acquisition pipeline
