SPH REIT reported a DPU of 1.35 S-cents for 3QFY15, which was flat YoY, while income available for distribution to unitholders increased 2.0% YoY to S$34.6m over the quarter. Due to higher YoY rental income in both its assets, Paragon and The Clementi Mall, we saw 3QFY15 gross revenue and net property income improve by 1.6% to S$51.2m and 4.3% and S$39.3m, respectively.

We judge these results to be slightly weaker than expected but note that both assets continue to enjoy strong occupancy rates as at the end of the latest quarter (Paragon: 99.8%, The Clementi Mall: 100%). Management also reported that the Paragon enjoyed positive rental reversions of 9.8% over the year to date, while The Clementi Mall saw negative rental reversions of 11.4% (on 3.4% on total NLA) as the group continues to balance the tenant mix. We put our Hold rating and fair value estimate of S$0.99 under review.

Source: OCBC Research - 8 Jul 2015