How 4 Singapore REITs Performed In the Latest Quarter: CDL Hospitality Trusts; Frasers Centrepoint Trust; Keppel REIT; Mapletree Logistics Trust

It’s the earnings season once again.

Investors will be closely watching the earnings this quarter as rising interest rates and fears of a recession occupy the headlines.

With that, let’s explore four Singapore real estate investment trusts (REITs) that announced their latest earnings or gave their quarterly business update. The REITs are diversified across different sectors, allowing us to get a flavour of their performance in this week’s edition of 4 Stocks This Week.

CDL Hospitality Trusts (SGX: J85)

As the name suggests, CDL Hospitality Trusts (SGX: J85) owns hospitality properties in its portfolio.

As of end-September 2022, CDL Hospitality Trusts owned 19 properties globally, including six hotels and one shopping mall in Singapore (examples of hotels here include Orchard Hotel, Copthorne King’s Hotel, and W Singapore – Sentosa Cove).

Source: CDL Hospitality Trusts earnings presentation

For CDL Hospitality Trusts’ third quarter ended 30 September 2022, gross revenue grew 46.4% year-on-year to S$58.5 million, out of which S$31.8 million was contributed by its Singapore hotels.

The vast improvement was due to strong global travel growth as governments eased pandemic-related travel restrictions and public confidence was restored. Specifically, leisure travel, the return of citywide events, and corporate group travel have led to the strong showing.

With the higher gross revenue, the REIT’s net property income (NPI) increased by 54.4% year-on-year to S$31.6 million.

The following snapshot shows how CDL Hospitality Trusts’ quarterly NPI has trended over three years:

Source: CDL Hospitality Trusts earnings presentation

We can clearly see that the lifting of travel restrictions has helped CDL Hospitality Trusts’ NPI soar.

For the Singapore hotels, revenue per available room (RevPAR), a performance metric used in the hospitality sector, surged 164% year-on-year to S$199 while the average occupancy rate rose 15.7 percentage points to 88.1%.

As of 30 September 2022, CDL Hospitality Trusts’ gearing ratio stood at 39.4%, with its blended cost of debt at 2.5% and interest coverage ratio at 3.7x. 64.4% of its borrowings are on a fixed rate basis, mitigating the impact of rising interest costs.

In the third quarter of 2022, Singapore’s visitor arrivals continued to improve, with 2.2 million visitors recorded, a 77.6% increase from the same period in 2021.

However, the figure was only around 45% of the 2019 third-quarter arrivals (pre-COVID-19 levels), primarily due to the absence of international travellers from China.

The eventual return of mainland Chinese travellers is expected to further boost recovery, which could, in turn, help boost CDL Hospitality Trusts’ financial results.

At CDL Hospitality Trusts’ unit price of S$1.12, it has a price-to-book (P/B) ratio of 0.9x and a distribution yield of 4.5%.

Frasers Centrepoint Trust (SGX: J69U)

Frasers Centrepoint Trust (SGX: J69U) is one of the largest suburban retail mall owners in Singapore. Its current property portfolio contains nine retail malls and an office building located in the suburban regions of our country.

Some of the malls in its portfolio include Causeway Point, Changi City Point, and White Sands.

Source: Frasers Centrepoint Trust earnings presentation

For its financial year ended 30 September 2022 quarter, gross revenue at Frasers Centrepoint Trust increased by 4.6% year-on-year to S$356.9 million.

The growth was on the back of:

• Full-year contribution from the REIT’s enlarged retail portfolio following its AsiaRetail Fund acquisition on 27 October 2020, and
• Absence of rental rebates provided to the tenants and increase in atrium income with the resumption of atrium events since end-March 2022.

However, the gross revenue increase was partially offset by a lack of contribution from Bedok Point, Anchorpoint, and YewTee Point, which have since been divested.

With the overall revenue growth, Frasers Centrepoint Trust’s NPI went up 4.9% to S$258.6 million, while distribution per unit (DPU) stepped up 1.2% to 12.227 Singapore cents.

The shopping mall REIT saw improvements in operating performance due to a 12.4% year-on-year increase in shopper traffic and an 11.3% rise in tenants’ sales. While Frasers Centrepoint Trust’s shopper traffic is below the pre-COVID average, it’s interesting to note that the REIT’s tenants’ sales were above 2019’s average level.

Source: Frasers Centrepoint Trust earnings presentation

Occupancy at the retail mall REIT remains healthy, with committed occupancy growing 0.4 percentage point quarter-on-quarter to 97.5%.

Frasers Centrepoint Trust’s balance sheet remains strong as well. As of 30 September 2022, its gearing ratio was 33%, with 71% of its borrowings hedged to fixed rates and its interest cover ratio at 5.2x.

Looking ahead, Richard Ng, the chief executive of Frasers Centrepoint Trust’s manager, said:

“… While there are headwinds from rising interest rates, inflation and volatilities in the global geopolitical situations, we see several opportunities that would help cushion the impact. These include rent growth and room for higher ancillary income, opportunity for asset enhancement initiatives (“AEI”) for value creation and higher contributions from the acquisition of the additional 10% stake in Waterway Point to be completed in FY2023. FCT’s malls are also well positioned to leverage their proximity to homes, provision of basic essentials and strong loyalty program membership base to benefit from the rising trend of hybrid work arrangement and increasing consumer preference for click-and-collect and order fulfilment from malls near their homes.”

At Frasers Centrepoint Trust’s unit price of S$2.08, its P/B ratio stands at 0.9x, and its distribution yield is 5.9%.

Keppel REIT (SGX: K71U)

Keppel REIT (SGX: K71U) invests in Grade A commercial properties in Singapore, Australia, and South Korea.

In Singapore, it owns buildings such as Ocean Financial Centre (79.9% interest), One Raffles Quay (one‐third interest), and Keppel Bay Tower.

Source: Keppel REIT earnings presentation

For the nine months ended 30 September 2022, property income grew 1.4% year-on-year to S$164.4 million.

The growth was mainly due to the acquisition of Keppel Bay Tower in May 2021 and adjustments of income tax expenses for previous years.

However, the increase was partially offset by the divestment of 275 George Street in Brisbane in July 2021 and a lower contribution from 8 Chifley Square.

Meanwhile, NPI increased by 2.5% to S$132.6 million, and distributable income rose by 3.4% to S$165.4 million.

Keppel REIT’s portfolio enjoys a healthy occupancy rate of 96.8%, as of 30 September 2022. Its gearing ratio was also strong at 38.4%, with 72% of its borrowings on a fixed rate basis.

Unitholders will be delighted to note that over the upcoming five years, Keppel REIT will be distributing S$20 million annually, as explained by Tan Swee Yiow, chairman of Keppel REIT’s manager:

“To celebrate its 20th anniversary in 2026, Keppel REIT will, over the next five years, distribute $100 million out of its accumulated capital gains as an Anniversary Distribution in appreciation to Unitholders for their support. With the unwavering support of Unitholders, Keppel REIT has grown its assets under management from the initial portfolio of about $600 million to approximately $9 billion as at 30 September 2022. Our disciplined portfolio optimisation not only grew the portfolio from four assets in Singapore to 11 assets across Singapore, Australia and South Korea, it also transformed Keppel REIT into a leading office REIT in Asia Pacific. The Anniversary Distribution is a timely gesture to thank Unitholders.”

At Keppel REIT’s unit price of S$2.08, it has a P/B ratio of 0.6x and a distribution yield of 5.0%.

Mapletree Logistics Trust (SGX: M44U)

Mapletree Logistics Trust (SGX: M44U), or MLT for short, is the first Asia-focused logistics REIT in Singapore listed in 2005.

As of 30 September 2022, the REIT had a portfolio of 186 logistics assets in Singapore, Australia, China, Hong Kong, India, Japan, Malaysia, South Korea, and Vietnam. In all, the assets were valued at S$12.9 billion.

Source: Mapletree Logistics Trust earnings presentation

The REIT announced that for its fiscal quarter ended 30 September 2022 (2Q FY22/23), gross revenue rose 11.4% year-on-year to S$183.9 million, while NPI grew 10.8% to S$160.0 million.

The growth came on the back of:

• Higher revenue from existing properties, and
• Contributions from accretive acquisitions completed in 1Q FY22/23 and FY21/22.

However, the overall growth was dampened by the depreciation of foreign currencies, including Japanese Yen and Korean Won against the Singapore Dollar.

The REIT said that at the distribution level, the impact of weakening currencies had been mitigated by using foreign currency forward contracts to hedge income from overseas assets. Mapletree Logistics Trust’s DPU grew 3.5% to 2.248 Singapore cents.

Ng Kiat, chief executive of the REIT’s manager, commented the following in the REIT’s earnings release:

“MLT continued to deliver steady growth in DPU underpinned by our diversified portfolio. While overall occupancy rates have stayed resilient with positive rental reversions achieved for the quarter, we are mindful that market uncertainty has increased amidst intensifying economic headwinds. We will continue to focus on maintaining portfolio stability while driving our portfolio rejuvenation strategy to strengthen MLT’s resilience.”

At Mapletree Logistics Trust’s unit price of S$1.52, its P/B ratio stands at 1.0x, and its distribution yield is 5.4%.

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