It’s earnings season once again and the REIT sector is, as usual, the first in line to report its financial results.
This round, all eyes will be scrutinising how these REITs are coping with the combination of high inflation and surging interest rates.
Despite these challenges, there were a bunch of REITs that reported a higher distribution per unit (DPU).
The first four are well-managed REITs have gone against the odds to post better DPU even as the REIT managers grapple with a changed landscape.
As the earnings season rolled along, we uncovered another four REITs that raised their DPU.
Here is the quartet that could make it onto your buy watchlist.
Keppel REIT (SGX: K71U)
Keppel REIT owns a portfolio of prime commercial assets in Singapore, Australia, South Korea and Japan with assets under management (AUM) of S$9 billion as of 31 December 2022.
The REIT released its fiscal 2022 (FY2022) earnings that saw property income inch up 1.2% year on year to S$219.3 million.
Net property income (NPI) attributable to unitholders edged up 2% year on year to S$158.9 million while DPU increased by 1.7% year on year to S$0.0592.
Investors should note that the commercial REIT had released S$10 million of distributable income as a 20th-anniversary distribution.
The manager has announced a total of S$100 million in anniversary distribution spread out over four years up till 2026, with S$10 million being doled out every half year.
Keppel REIT maintained a high occupancy of 96.3% as of 31 December 2022 with a long portfolio weighted average lease expiry (WALE) of six years.
Aggregate leverage stood at 38.4% with an all-in interest cost of 2.29%.
Slightly more than three-quarters of the REITs loans are on fixed rates, and a 0.5 percentage point increase in interest rates will result in an approximately 1.9% decline in DPU.
CapitaLand Ascott Trust (SGX: HMN)
CapitaLand Ascott Trust, or CLAS, is the largest hospitality trust in Asia-Pacific with an AUM of S$8 billion as of 31 December 2022.
CLAS owns a portfolio of 105 properties in 47 cities across 15 countries.
For FY2022, CLAS saw a strong recovery as it enjoyed higher revenue from its existing portfolio and saw contributions from newly-acquired properties in longer-stay assets in the US and Japan along with service residences in Australia, France, and Vietnam.
Revenue jumped 58% year on year to S$621.2 million while the distributable amount rose 38% year on year to S$189.8 million.
Distribution per stapled security (DPSS) climbed 31% year on year to S$0.0567.
For FY2022, portfolio revenue per available unit (RevPAU) surged by 74% year on year to S$120 in tandem with border reopenings and an increased flow of tourists.
CLAS has several asset enhancement initiatives (AEI) planned for this year for properties such as Riverside Hotel Robertson Quay, Citadines Les Halles Paris, and Citadines Holborn-Covent Garden London.
CDL Hospitality Trusts (SGX: J85)
CDL Hospitality Trusts, or CDLHT, is a hospitality trust with S$3.1 billion of AUM as of 31 December 2022.
The trust owns 19 properties with 4,821 rooms and a retail mall along with a build-to-rent project in the pipeline comprising 352 apartment units.
For FY2022, the recovery in air travel and tourism has propelled CDLHT’s revenue up by 45.4% year on year to S$229.4 million.
NPI jumped by 43.7% year on year to S$123.7 million with DPSS (after retention) rising by 31.9% year on year to S$0.0563.
The hospitality trust enjoyed a healthy gearing level of 36.6% with a weighted average cost of debt of 3.5%.
Around 56% of its loans are on fixed rates, and a 1% increase in benchmark rates will lead to a S$0.0086, or 15.3%, dip in DPU.
CapitaLand Ascendas REIT (SGX: A17U)
CapitaLand Ascendas REIT, or CLAR, is an industrial REIT with 227 properties worth S$16.4 billion as of 31 December 2022.
CLAR has a tenant base of more than 1,720 international and local companies spread out over a wide range of industries.
Gross revenue for FY2022 increased by 10.3% year on year to S$1.35 billion while NPI improved by 5.2% year on year to S$968.8 million.
DPU inched up 3.5% year on year to S$0.15798.
Portfolio occupancy remained high at 94.6% and the REIT registered a positive portfolio rental reversion of 8%.
Aggregate leverage stood comfortably at 36.3%, allowing CLAR to take on further debt to carry out acquisitions.
Close to 80% of the REIT’s debt is on fixed rates with the cost of debt staying low at 2.5%.
A 3% increase in interest rates will crimp FY2022’s DPU by close to 6%.
CLAR has a list of ongoing projects worth S$617.4 million that will help to enhance and improve the portfolio’s rental income, set to complete from this year till 2Q2026.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
