Issue price S$0.90
Long-term exposure to resilient retail and growing healthcare services sectors in Singapore
Synopsis: Projected annualised yield of 5.58% (2HFY13) and 5.79% (FY14) is underpinned by positive rental reversion at Paragon and Clementi Mall. The listing yield lies between those of two listed peers, CapitaMall Trust and Frasers Centrepoint Trust, but the listing price-to-book (PB) of 1.01x is low compared to average PB of peers at 1.2x* and hence could offer some upside potential upon listing. This issue will appeal to income-oriented investors with low risk appetite seeking stable income backed by quality assets. Subscribe. (*Bloomberg estimates.)
Exposure to Singapore’s resilient prime and suburban retail sector and growing healthcare services sector.
SPH Reit is a real estate investment trust established with the objective of investing primarily in a portfolio of retail income-producing real estate in the Asia Pacific region. The initial portfolio comprises two properties, namely Paragon, a 99-year leasehold interest in a premier upscale retail mall (Paragon Mall) and medical suite /office property (Paragon Medical), and Clementi Mall, a mid-market suburban mall located in the centre of Clementi town, an established residential estate in the west of Singapore. These two properties have a total of about 900,000 mil sqft in net lettable area, enjoy an average occupancy rate of 100% and are valued at about S$3.0bil as at 28 February 2013. The sponsor of the Reit is Singapore Press Holdings, Southeast Asia’s leading media organization, which will hold a large 70% stake in SPH Reit (assuming the over- allotment option is fully exercised), underscoring SPH’s long-term support and commitment to grow the Reit.
Platform for organic growth from resilient retail-cum-medical/office markets in prime Orchard Road belt….
Growing international visitor arrivals, interest from international retailers and limited new retail supply in the premier shopping and tourist belt of Orchard Road will underpin prime retail rentals of Paragon Mall. Singapore’s growing reputation for high quality healthcare services, attracting medical tourists from the regional countries particularly Indonesia, will also underpin rentals for Paragon Medical. According to Urbis, Singapore medical spending is expected to grow at a CAGR of 8.3% from 2011 to 2018. Underscoring rental resilience at Paragon, the mall has achieved a pre-commitment of 100% and 54.9% (as at 31 May 2013) respectively for the 32.8% and 36.6% of prime retail space expiring at the mall in FY13 and FY14. Paragon is also well-poised to benefit from the firm rental trend with a short weighted average lease expiry (WALE) of 1.6 years.
Publish date: 23/07/13