It's the reporting season again, which means it's time for a review on how the companies in
my portfolio are doing.
Same as before, I'm reading up on the reports and finding time to pen down my thoughts while baby daughter is asleep. Only difference this time is that I have a baby son in the room too.
Purpose of this post is as a record for my future reference and for sharing to readers who are interested.
Also, not doing any side by side comparisons with past results as these can be found easily in the highlights presentations and financial statements.
Most of the content written below are garnered from the reports. Some are from my memories and some are my personal opinions.
Also, not doing any side by side comparisons with past results as these can be found easily in the highlights presentations and financial statements.
Most of the content written below are garnered from the reports. Some are from my memories and some are my personal opinions.
TLDR Summary
1) Ascendas: Add
2) CICT: Maintain
3) CapitaLand: Maintain / Add
4) CRCT: Add
5) DBS: Add
6) ESR Reit: Maintain / Sell
7) ISOTeam: Sell
8) MLT: Add
9) MNACT: Maintain
10) Netlink Trust: Maintain / Add
11) OCBC: Add
12) RHT: Pui!
13) SingTel: Maintain
14) Suntec: Maintain
Ascendas Reit
Generally a good set of results presented in 3Q FY20.
Conclusion:
In the next three years, around 4.4 million m2 of industrial space will be added to the local market.
Unless the economy starts to have a more positive outlook (Singapore's 2020 GDP is projected to contract 5 to 7%), this influx of new industrial space would likely affect the rental reversion and occupancy rates.
The Good:
Portfolio occupancy remains high at 91.9%. In fact it's a slight improvement over the previous quarter.
(Singapore portfolio occupancy is at 88.8%. But overall portfolio occupancy is pulled up by the Australian and UK portfolios)
Leverage decreased slightly compared to previous quarter. Well positioned to make further investments if needed.
Still has around $4.2 B headroom before 50% aggregate leverage is reached.
Average debt maturity of 3.7 years.
Interest coverage of 4.3 times.
High levels of natural hedge for Australia, UK and US which helps to minimise the adverse effects of Forex.
3.9 years WALE by gross revenue. Only about 2.9% of gross rental income is due for renewal in FY20.
Diversified tenant base. Top 10 tenants account for 17.7% of monthly portfolio gross revenue.
Diversified portfolio. No single property accounts for more than 4.5% of monthly gross revenue.
The Bad:
Negative rental reversion for this quarter compared to the previous quarter which achieved +4.3%.
This is mainly caused by the Singapore portfolio where almost all of the property types has negative rental reversion.
Of note, the high specs industrial and data centres have seen negative rental reversion for two quarters in a row.
To note, YTD 9 tenants have pre-terminated their leases locally.
Conclusion:
Unless the economy starts to have a more positive outlook (Singapore's 2020 GDP is projected to contract 5 to 7%), this influx of new industrial space would likely affect the rental reversion and occupancy rates.
On the other hand I'm looking forward to the upcoming preferential offering (PO) which is launched to fund their latest proposed acquisition of 2 freehold office buildings in San Francisco, a portfolio of data centres in Europe and a suburban office property in Australia.
Though the PO price is not that fantastic I will probably still subscribe for it with small excess to round off to whole lot since the share price is hovering higher than the PO price.
It will be an average up for me though.
Will look out for the coming quarters on the macro environment as a guide to my investment strategy.
CapitaLand Integrated Commercial Trust
The last time I wrote about this counter it was still known as CapitaLand Commercial Trust.
The last time I wrote about this counter it was still known as CapitaLand Commercial Trust.
It has since been renamed as CapitaLand Integrated Commercial Trust (CICT) after its merger with CMT has been concluded.
It has been a good ride with CCT. Thank you for the memories.
Following is based on the 3Q FY20 results.
The Good:
Apart from Six Battery Road which is undergoing AEI and CapitaSpring which is currently being built, all other properties in the portfolio has occupancy well above 90%.
Aggregate leverage stands at 36.9%. Still comfortable.
Positive rental reversions despite the softening market conditions.
Aggregate leverage stands at 36.9%. Still comfortable.
Low cost of debt at 2.2%, interest coverage at 5.3 times.
Average debt maturity of 3.2 years.
7 years lease at 21 Collyer Quay to WeWork will commence by 4Q 2021.
More meaningful contribution coming in from Main Airport Center (MAC) which helped to cushion the fall in NPI. This is one of the few bright spots amongst the properties in the portfolio.
Although this is a slight drop from the previous review (37%), top 10 tenants still account for 34% of monthly gross rental income.
Comparing to the same period last year, revenue and net property income (NPI) dropped slightly at 4.4% and 6.3% respectively which wasn't as bad as CMT.
In
the previous review which I wrote in May this year, I mentioned that
CapitaSpring which is expected to be completed by 2021 and which has
only secured committed occupancy of around 35%, is a
bit of a concern to me.
I was also suspecting it would be challenging to secure tenants during this period due to the current situation.
A glance through of its latest results reveals a negative rental reversion YTD with Raffles City the worst hit.
The Bad:
Although this is a slight drop from the previous review (37%), top 10 tenants still account for 34% of monthly gross rental income.
This is almost double that of Ascendas Reit and honestly, is too high for my liking. I would prefer if it is around 25% or less.
Comparing to the same period last year, revenue and net property income (NPI) dropped slightly at 4.4% and 6.3% respectively which wasn't as bad as CMT.
Except for CapitaGreen, all Singapore operating properties reported lower NPI.
There is also no NPI contribution from 21 Collyer Quay and Bugis Village.
Distributable income (DI) dropped 17.3% and DPU dropped 19.1%.
I was also suspecting it would be challenging to secure tenants during this period due to the current situation.
As it turned out, the occupancy committed as of 3Q FY20 is still at 34.9%.
CapitaSpring will be a drag to the overall financials if not improved by its targeted completion next year.
Raffles City which accounts for 22% of overall NPI performed quite badly which contributed to a substantial extent to the fall in the overall portfolio performance of CCT.
Moving forward with 100% of Raffles City now sitting in CICT's portfolio, it would be interesting to see how it performs in the next coming quarters especially in the rental rates which sees a negative 15.9% YTD.
CMT
A quick one on CMT since perhaps this review should be written together with its results for entirety.
Gross revenue and NPI also dropped 19.7% and 23.2% respectively compared to the same period last year.
However overall portfolio occupancy is healthy at 98%.
Another good thing is that the aggregate leverage is still pretty low and the interest coverage is at 4 times.
Shopper traffic decreased by 40.4% YTD. But that is not an accurate picture since malls are a direct hit from the Covid situation. We should be able to get a fairer picture in the next reporting.
Conclusion:
Have received my last batch of distribution as well as the clean up distribution from CCT.
Prior to the conclusion of the merger I have added more units of CCT to increase my holdings. I have also bought some for wifey as a new unitholder for this counter.
Post merger, our holdings stand at 5,400 units and 3,600 units respectively.
I have mentioned in previous posts that I am generally not feeling bullish about Singapore's retail scene.
Currently I have exposure to both retail and office segments in the form of CICT and Suntec Reit.
CapitaLand
Exciting times for CapitaLand with the completion of merger between CCT and CMT, and the expanded mandate of CRCT into office, industrial spaces and integrated developments.
Resilient and improving results shown in 3Q 2020.
However these two asset classes are naturally the most badly hit by the pandemic so it's not a big surprise.
The Good:
Gearing stands at 0.64 times, same level as in my previous review. I feel this is acceptable considering this is a property counter after all and when comparing to its peers like Frasers Property.
To put things into perspective, it has $2.6 B of headroom before it reaches 0.7 times gearing.
$14.6 B of cash balances and facilities available for investments.
Debt maturity is also acceptable at 3.5 years and interest coverage is decent at 4.8 times.
YTD China residential sales value increased 1.3 times yoy with 3Q accounting for almost half of the value. This is encouraging as it shows that buyers are still in and more are coming back to the market
Portfolio occupancy remains high across the different asset classes and markets except for retail and lodging.
The Bad:
Retail and lodging segments were badly hit this year. The former saw a
drastic drop in shopper traffic and tenant sales across the different
markets while the overall yoy RevPAU for lodging fell by 46%.
Conclusion:
I have been holding this counter for 4 years now and have been impressed by the strength of the management and their dual approach of capital recycling and recurring income model.
The reason why I did not add to my holdings during this period is because I am concentrating my funds on the two banks and CRCT as mentioned in earlier posts.
If I have excess funds, CapitaLand is one counter that I would love to own more.
With the promising progress of Covid-19 vaccines and gradual reopening of economies and global travel, it is not hard for the share price of CapitaLand to go back to the $3.70 - $3.90 level which is still below its NAV by the way.
Of course how fast will it takes is anybody's guess but recently the share price has ran up nicely since the beginning of this month.
However having said that I would keep a close eye on the Reits within the group since I am holding 3 of them - Ascendas, CICT and CRCT.
Among these three I am more concern with CICT due to the reasons stated in the CICT review above.
CapitaLand Retail China Trust
Results based on latest 3Q 2020 report.
All malls are operational with shopper traffic and tenant sales improving qoq and closer to pre-covid levels.
Relatively low gearing (increased slightly from last quarter) and cost of debt at 34.7% and 2.77% respectively though it would be nicer if the latter can be lower with the lower interest rate environment.
The Good:
Relatively low gearing (increased slightly from last quarter) and cost of debt at 34.7% and 2.77% respectively though it would be nicer if the latter can be lower with the lower interest rate environment.
Debt maturity stands at 3.2 years. Average, but better than last quarter's 2.75 years.
3.7 times interest coverage. Not too bad.
Sufficient headroom of $1.2 B to 50% MAS regulatory limit.
Expiry to the land use right for all the malls are minimum 20 years and above.
93.7% portfolio occupancy rate which is slightly higher than previous quarter. However this figure is excluding Minzhongleyuan as its operations has been put under review.
It would be interesting to see what will be the outcome of the review as I have said before that MZLY is a drag to the overall portfolio.
Anyway I emailed the IR for some updates to the review and following screenshot is their reply.
The Bad:
As a matter of fact the occupancy was 62.7% in Mar 2019. Now it has hit 44.6%.
Overall WALE by gross revenue income is 2.4 years and 3.5 years by net lettable area.
Around 50% of the lease by total GRI is due to expire within the next two years.
Conclusion:
Offline sales still accounts for 76% of China's retail sales. And with CRCT's malls in the tier 1 and 2 cities across China, they are well positioned to capture this pie.
Having
said that, I also like that CRCT is focusing on an online-offline
integrated ecosystem to capture the growing online market as well.
The expanded mandate of CRCT into office, industrial spaces and
integrated developments not only provides opportunites for growth into more areas.
I feel there could be synergy between the different asset classes such as commercial, integrated development and the traditional stronghold of CRCT, the retail malls.
Ample opportunities from strong sponsor.
This diversification move will help reduce concentration sector risk.
For example, the upcoming acquisitions of business parks and balanced ownership of Rock Square if passed through, will reduce the current 100% retail sector exposure to 57% by GFA and 80% by GRI.
Tenant concentration risk will also be correspondingly reduced from 18.4% to 15.1% by GRI.
For this counter I will follow my plan and continue to add in batches whenever opportunity arises.
The upcoming preferential offering is one such opportunity.
DBS
Results based on 3Q 2020 report.
Net profit up by 4% qoq.
The Good:
CET-1 of 13.9% though lower than end of last year, is still well above MAS regulation of 6.5%. No worries here as our 3 local banks have been in strong financial position for the past five years.
No worries on the liquidity as well with LCR at 135%.
Deposits up by 9% over 9M due to $70 B Casa inflow. Guess cash is still king for many locals.
Management expects mid single digit loan growth and double digit fee income growth in 2021.
Total income fell 4% qoq.
The Bad:
Some corporate NPL occurrences. Overall NPL at 1.6% which is maintained at the same level as when I did my previous review back in May 2020.
NPA rose 3% qoq and is expected to trend higher with the expiration of governmental reliefs in 2021.
Allowance of $3 B to $5 B for the next two years remains.
Corporate loan moratoriums increased marginally but I guess the good thing is that these loans are mostly secured.
3Q dividend at $0.18 which is the level advised by the government (60% of 2019 dividend payout).
Net interest income (NIM) decreased by 6% qoq.
In the previous review I mentioned that it is important to look out for 2Q onwards
as that's where the full effect of interest rate cut comes in which
will likely depress the NIM.
This continues to hold true.
Conclusion:
Guess this can be considered a good set of results since this is a record 9M performance in terms of income and profit before allowances.
Apparently the market think so too because DBS share price has ran up aggressively since the announcement of results.
Same as before, need to monitor on the NPL and NPA of which the latter has been guided by the bank to increase next year.
Apparently the market think so too because DBS share price has ran up aggressively since the announcement of results.
Same as before, need to monitor on the NPL and NPA of which the latter has been guided by the bank to increase next year.
With Yellen expected to be the new Treasury Secretary I don't expect the net interest margin to recover any time soon since she is known to take a measured approach in raising interest rates.
Don't get me wrong though. I have quite a favourable opinion of this woman though Donald Trump might think otherwise since apparently one of the reasons he did not continue with Yellen for the top Fed post back then is because he felt she was too short. Yes literally. The height.
Donald Trump can be quite a funny guy sometimes.
Since March this year I have already added DBS shares in two small batches.
Unfortunately the planned third batch did not materialise as the share price did not hit my TP subsequently. Will continue to follow plan and add when opportunity arises.
Unfortunately the planned third batch did not materialise as the share price did not hit my TP subsequently. Will continue to follow plan and add when opportunity arises.
ESR-Reit
Result is nothing to shout about. Fundamentals have deteriorated.
Muted results presented in 3Q 2020. Limited information presented in the financial highlights.
Possible merger coming up which might prove to be a catalyst for the share price.
Revenue, NPI and DI all fell for the 9M period as compared to the same period last year.
The Good:
Diversified portfolio with mix of asset classes which are quite well spread.
With the AEI of UE BizHub expected to complete next year, improved rental reversions and hence income, is possible.
With the AEI of UE BizHub expected to complete next year, improved rental reversions and hence income, is possible.
The Bad:
9M DPU dropped by 35% as compared to the same period last year.
Earnings per unit went into negative territory.
Conclusion:
The result highlights have very limited information. There is no mention on the other metrics such as occupancy rate, WALE, gearing level, cost of debt and rental reversions.
The Reit has performed quite poorly in the latter three when I did my previous review.
Nice to see the share price has moved up albeit slightly after consolidating in a tight range for a long time. It's weird because there is no special news on this counter, at least not that I'm aware of.
Mr Market is weird. There are counters with apparent good news but the share price remains stagnant.
Possible catalyst to drive the share price to the next level is the proposed merger with Sabana Reit which might lead to the Reit's inclusion into key indices.
Personally I would be happier if the merger is with Aims Apac Reit instead though that might happen after the merger with Sabana is concluded.
And that is the only reason why I am still holding on to my units.
Same concern as with Ascendas Reit above. The influx of new industrial spaces in the next 3 years would likely affect the rental reversion and occupancy rates.
Will consider to sell when I run out of patience for the AA Reit merger or if cash is needed for better opportunities elsewhere.
ISOTeam
Latest update from ISOTeam is the FY2020 results released on 30th Oct 2020.
I had expected the results to be bad. But it turned out to be worse than expectation.
The Good:
$165.7 million orders as of 30th Sept 2020, to be delivered within the next two years.
The Bad:
2H was expectedly, hit badly in terms of revenue and earnings though the decline was partially offset by governmental aids.
Revenue dropped 56% yoy in just 2H alone. Full year dropped 32.9%.
Gross profit margin (GPM) which has always been a concern for ISOTeam, was compressed to 2.1% compared to 15.8% in FY19.
Gross profit dropped 92.1% yoy achieving just $1.9 M. This resulted in a net loss of $19.6 M in FY20.
Conclusion:
Positive effect on the share price from the previously-mentioned catalysts such as its record order book, increased contract wins from election year & integration of Pure Group, failed to materialise.
This may or may not be attributed to Covid-19. But one thing I've noted is that the share price of ISOTeam did not move in tandem when the market is in a general uptrend recently.
When I first bought into ISOTeam, it was meant to serve as my proxy to the construction industry.
However with the outlook of this sector not looking too rosy in the next 1 - 2 years coupled with the deteriorating fundamentals of the company especially on heavily compressed margin, I am considering to sell in the near future if I need the cash for a better investment elsewhere.
Mapletree Logistics Trust
Top 10 tenants account for 27% of monthly gross rental income. 25% or less would be nice.
After the dead wood here comes one of the star performers in my portfolio. Following is based on the 2Q FY20/21 results.
The Good:
One of the things I like about MLT is its geographical diversification.
Most of the 2Q metrics such as gross revenue, NPI, borrowing costs, amount distributable and DPU increased yoy.
Comparing 1H yoy, it is even more impressive.
1H gross revenue and NPI rose >9% and >10% respectively.
As a result 1H DPU rose 1.2%.
Latest portfolio occupancy remains high at 97.5%. Nice.
Positive rental reversion of 1.5% across multiple markets despite the softening market.
WALE by NLA of 4.2 years slightly lower than last review but still good nonetheless.
Average debt maturity and average cost of debt at 3.8 years and 2.2% PA.
Aggregate leverage of 39.5%. Not surprising with the slew of acquisitions.
Interest coverage of 4.9 times.
Prudent management of Forex risk with 75% of distributable income in the next 12 months hedged into SGD.
The Bad:
Top 10 tenants account for 27% of monthly gross rental income. 25% or less would be nice.
Conclusion:
One of the rare Reits to increase its DPU. What more to say?
The recent preferential offering gave me a chance to round my holdings to a whole figure.
Added 2,483 units @ $1.99 (allocation + excess) during the PO to bring my holdings to 10,000 units at an average price of $1.38. An average up.
What I like most about MLT is that they have been actively looking for yield-accretive assets along the One Belt One Road regions and other developed countries.
A good example is the latest proposed acquisitions in China, Vietnam and Malaysia.
This positioned them well to capture the emerging markets which offer the greatest potential returns yet at the same time, combined with the stability from the developed markets such as South Korea and Australia.
A spanner in the works may comes in the form of a prolonged pandemic situation which may soften the demand for warehousing space.
Game plan here is simple. To add more if opportunities arise.
Mapletree NAC Trust
Following is based on results from 1H FY20/21.
1H FY20/21 revenue, NPI, NPI margin, DI, DPU and share price all fell comparing to same period last FY.
The Good:
96.6% portfolio occupancy.
Positive 8% and 5% rental reversions for Sandhill Plaza and Japan properties respectively.
4% NPI improvement from last quarter.
Average interest coverage at 3 times.
2.09% relatively low interest rate.
Average debt maturity of 3.07 years.
84% of expected forward DI hedged into SGD, reducing Forex risk.
The Bad:
Lower average rental rates at Festival Walk and Gateway Plaza.
FW average rental reversion in 1H is negative 12%.
Retail sales and foot fall at FW also fell by 36.2% and 45.5% yoy respectively.
Negative 9% average rental reversion at Gateway Plaza.
Concentration risk from Festival Walk though reduced, is still high. It still accounts for 46% of the revenue and NPI. (55% and 54% in my previous review)
Aggregate leverage is high at 40.1%.
Top 10 tenants account for 36.1% of total GRI. Too high in my opinion.
Portfolio WALE by GRI is weak at 2.5 years.
The uncertainty from Covid-19 is still a major factor on the Reit's performance especially in the markets they are operating in.
Conclusion:
This is evident by the 26.7% yoy decline in Hong Kong retail sales in April to August 2020 as a result of travel restrictions and social distancing measures.
The fall in the various metrics is reflected in the share price which declined by 29.2% comparing 1H FY20/21 to 1H FY19/20.
Nevertheless the contributions from the new properties are a welcome sight.
Things should start to improve as the economy starts to recover, hopefully in the near future with the discovery of high efficacy vaccines.
To hold and monitor.
Netlink NBN Trust
Above average performer in my portfolio. Following is based on the 1H FY21 results.
The Bad:
Revenue went down 2.5% compared to 1H FY20 mainly due to Covid-19.
To add more if price hits previous purchased price or NAV.
The Good:
EBITDA and profit after tax went up by 3.4% and 1.5% compared to 1H FY20.
EBITDA margin increased by 4.4%.
Residential & non-residential fibre connections, NBAP and segment connections remain stable.
DPU remains stable. 1H DPU increased by 0.01 cent compared to same period last FY.
EPU also increased slightly by 0.02 cents compared to 1H last FY.
Cash flow has improved due partly to governmental grants. Cash and cash equivalent improved to $181.4 M from $142.4 M same period last year.
The Bad:
Revenue went down 2.5% compared to 1H FY20 mainly due to Covid-19.
Conclusion:
As mentioned in my previous review:
(Short term wise, next couple of quarters might see its numbers being affected due to the Covid-19 measures implemented which should affect their installation of residential connections.)
This thought still holds true. Covid-19 still presents the biggest risk to Netlink's business currently.
Because of the nature of business, the governmental measures taken in the virus situation has affected the revenue across the different business segments such as installation-related, diversion and ducts & manholes.
Restriction of access and work stoppages played a big part here.
But the good news is once the virus situation improves, these temporary measures will be lifted too.
65.3% of revenue still comes from residential connections. This may or may not be a good thing.
On one hand residential projects in Singapore are always available whether the economy is good or not. In this aspect fibre connection projects in this segment is almost guaranteed.
On the other hand this presents a concentrated risk. Despite being the dominant player, availability of projects doesn't mean availability of business.
OCBC
No mention on coming dividend policy but likely will remain at 60% of last year's levels.
No further distribution of distributable income until further notice.
Results based on 3Q 2020 report.
Net profit up by 41% qoq due to fall in allowances which reverted to near 3Q19 figure. (Without that, operating profit actually went down 5% qoq.)
The Good:
ROE improved by 2.5% qoq but still falls short compared to 3Q19.
NPAs fell by 2% qoq while NPL is maintained at 1.6% (same level qoq and yoy).
Lower new NPAs than last quarter.
>100% coverage for NPA.
Great Eastern's sales grew 18% and net profit contribution increased by 43% yoy. (Sales were up 51% qoq but profit contribution to the group actually fell by $9 M qoq)
Highest quarter of total wealth management income since 2018. Contributed to 33% of the group's income for 9M20.
Record high of Casa deposits. (Same trend as seen at DBS. Looks like cash is king is real among the local population.)
CET-1 of 14.4%, slightly higher than last quarter and well above MAS regulation of 6.5%.
LCR at 136%. Adequate liquidity cover.
9M NAV improved to $10.52 compared to $10.08 same period last year.
The Bad:
Full 9M results are still shy of last year's.
Net profit fell 12%.
ROE, ROA and EPS are lower than last year.
9M20 NIM dropped to 1.63% from 1.77% though this is expected. 3Q20 NIM dropped to 1.54% from 1.6% last quarter.
Conclusion:
No mention on coming dividend policy but likely will remain at 60% of last year's levels.
Great Eastern is a traditional cash cow for OCBC and it's nice to see the improved contributions from them again after the lacklustre results in my last review.
Same as before, need to monitor on the NPL and NPA for the rest of the year and next.
Management has guided gross NPL of 2.5% to 3.5% for 2021.
NIM is also not expected to recover any time soon.
Despite the above, the market seems to have great confidence in our local banks as reflected in their current share price.
I'm keen to see the coming full year results from the bank.
Since March this year I have added OCBC shares twice and is still holding.
The planned third batch did not materialise as the share price did not hit my TP subsequently but I am ready to add more when the opportunity arises.
RHT Health Trust
Long story short, EGM for the proposed voluntary winding up is still postponed with no fixed date due to the court proceedings of Fortis.
The planned third batch did not materialise as the share price did not hit my TP subsequently but I am ready to add more when the opportunity arises.
RHT Health Trust
Long story short, EGM for the proposed voluntary winding up is still postponed with no fixed date due to the court proceedings of Fortis.
Unaudited results as of 30th Sept 2020, 2QFY21 as follows.
No further distribution of distributable income until further notice.
Total unitholders' fund currently stands at $16.595 million.
No borrowings.
NAV: $0.0205.
Game plan for this? Wait. What else?
SingTel
1H revenue fell 10% yoy (Singapore consumer -19%, Australia consumer -11%, group enterprise -3% and group digital life -30%).
SingTel is a counter which I have been holding since 2016.
The award of the digital bank license should be any time soon and like what I said in some earlier posts, I feel the Grab-SingTel partnership stands a good chance of being awarded one of the licenses.
Results presented in 1H FY21.
I like their initiatives in digitalisation.
The Good:
1H pre-tax profit from regional associates increased by 11% yoy.
(Going deeper, Telkomsel, AIS, Intouch and Globe actually turned in lower profit yoy)
Turned in a $466 M net profit from a net loss of $127 M in 1H FY20. Well done!
This is due largely to the reduced exceptional cost from Airtel. Sink hole finally seeing an end?
Airtel's pre-tax losses in 1H FY20 was S$274 M. This is reduced to S$30 M in 1H FY21.
32.1% net debt gearing.
Uptick in latest quarter of revenue recovery in Singapore and Australia consumer mobile service, group enterprise and group digital life after quarters of decline. Nice turnaround.
Potential of 5G services. Had a successful trial involving more than 20K postpaid customers in Singapore. Broke Australia record for commercial 5G speed.
The Bad:
Good thing is qoq figure for the above segments is mostly increasing with one remaining stable.
Excluding the exceptional items, underlying net profit actually fell 36% yoy.
FCF declined 14% yoy to $1.7 B.
Comparatively high net finance expenses.
This is mainly due to a large reduction of investment income compared to 1H last year where SingTel received $187 M of income from investment as a pre-IPO shareholder of Airtel Africa.
Reduced dividends. Of course!
Conclusion:
I like the news of the acquisition of the mobile service business of amaysim which is the largest MVNO in Australia.
This is one part of Optus strategy, the other being the launch of Gomo.
These initiatives are targeted at the MVNO segment and the budget-conscious group in the mobile market which are in fact the trend nowadays even in Singapore.
Granted that the telecommunications industry is a challenging one where margin is being compressed in most markets, I feel that the former CEO has under-performed if that is the right word to use.
Hopefully the new CEO has some tricks up his sleeves to transform SingTel's performance.
This might well be the catalyst for the market to re-rate SingTel's share price.
Last year's dividend payout is around $2 B. If we annualise this year's FCF based on 1H, full year FCF will be around $3.4 B.
Furthermore SingTel has implemented scrips option this year.
I don't see much of an issue for SingTel to continue paying dividends.
The dividend policy will be reviewed at the end of the FY when there is more clarity on the impact of Covid-19 on the group's businesses.
Will hold on to current holdings without adding and continue to monitor.
Suntec Reit
2.5% / 2.6% financing cost. Not too bad. (Different numbers reported in two separate slides)
Singapore retail overall occupancy of 93.4%.
Well staggered lease expiry for Singapore retail spaces.
Overall Australian occupancy of 91.7%. Another planned acquisition. This time a 50% interest in Nova properties in London. Finally a non-Australian property.
The metrics look good on paper: NPI yield of 4.6%, DPU accretion of 3.4%, 100% committed occupancy with long WALE of 11.1 years and 2 years guarantee on retail income.
In my opinion, poor set of results in 3Q 2020.
The Good:
Positive revenue contributions from the Australian properties. Stable revenue from Suntec City Office.
Average debt maturity of 3.09 years.
>60% of AUD income hedged. Although it's not that high, it's better than the 20% reported in my last review.
Singapore office overall occupancy of 98.1%.
Well staggered lease expiry for Singapore office spaces.
Another quarter of positive rental reversion for office sector. 10 consecutive quarters.
Singapore retail overall occupancy of 93.4%.
Well staggered lease expiry for Singapore retail spaces.
Two quarters of negative rental reversions for retail but overall positive 2.7% YTD. The negative rent reversions happened in 2Q and 3Q 2020 which is only to be expected with the lock down and travel restrictions in place.
Overall Australian occupancy of 91.7%.
21 Harris has a low occupancy rate of 68.7% but there is rent guarantee on vacant spaces.
Well staggered lease expiry for Australian assets too.
DPU dropped 21.9% yoy.
Aggregate leverage ratio of 41.5%.
The Bad:
DPU dropped 21.9% yoy.
3Q gross revenue, NPI and income from JV declined 13.4%, 19% and 14.7% yoy respectively.
Suntec City Mall and Convention reported lower revenue.
Average interest coverage of 2.6 times. This is much lower than the 5.3 times in my last review of this counter.
YTD there is a 6.4% early termination of leases based on NLA but this not expected to increase significantly for the rest of the year.
Suntec Convention outlook is still weak but MICE events of up to 250 attendees and church events of up to 100 persons have been allowed.
Conclusion:
The metrics look good on paper: NPI yield of 4.6%, DPU accretion of 3.4%, 100% committed occupancy with long WALE of 11.1 years and 2 years guarantee on retail income.
Let's see if this planned acquisition goes through.
For now I probably won't be adding on to my holdings in Suntec.
Can't believe it took me more than a week to finish this post. Finding pockets of time here and there to pen down my thoughts in a busy month is somewhat a challenge.
As mentioned in previous posts, I am not exactly feeling bullish about Singapore's retail scene and currently I have exposure in the form of CICT and Suntec Reit.
Due to the pandemic, downward pressure on rents is expected to continue.
My total holdings in both is not that big so I probably won't be losing sleep over this.
I don't like the high leverage of the Reit also.
Let's see the results of CICT and Suntec in the coming quarters. Who knows I might be wrong afterall.
Can't believe it took me more than a week to finish this post. Finding pockets of time here and there to pen down my thoughts in a busy month is somewhat a challenge.
Hope you enjoy reading the looonngg post and I would be glad if it helps in some way big or small, in your investments.
That's all from me for now. Bed time.. Ciao.
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