SPH REIT reported its 3QFY18 results which came in within our expectations. Gross revenue and NPI slipped 2.9% and 3.8% YoY to S$51.8m and S$40.6m, respectively. This was attributed to lower rental income at Paragon and higher utility rate contracted.

DPU was unchanged YoY at 1.37 S cents as management paid out S$110k of income available for distribution which was retained earlier in 1HFY18.

For 9MFY18, SPH REIT’s revenue declined slightly by 0.7% to S$158.8m, while NPI slipped 1.0% to S$125.0m and this formed 73.8% of our FY18 forecast. DPU of 4.11 S cents was unchanged from 9MFY17 and constituted 73.4% of our full-year projection.

Overall portfolio occupancy stood at 99.6%, a mild dip from the full occupancy registered in the previous quarter. Rental reversions for the portfolio remained in negative territory (-6.0% for 9MFY18), but improvement was seen as compared to 1HFY18 (-7.1%). This came in at - 6.2% for Paragon for 9MFY18 (1HFY18: -7.1%) but was positive at 5.3% for The Clementi Mall (1HFY18: -2.5%).

Maintain HOLD and S$1.02 fair value estimate on SPH REIT.

Source: OCBC Research - 11 Jul 2018