• SPH REIT's 9MFY8/19 DPU of 4.14 Scts (+0.7% y-o-y) represented 72% of our full-year forecast. We expect the REIT to declare higher dividends in 4Q.
• Contribution from The Rail Mall and Figtree Grove Shopping Centre, which were acquired in 2H18, boosted 9MFY19 results.
• Maintain HOLD with a target price of S$1.11. The stock lacks major catalysts.

SPH REIT's 9MFY19 Results Boosted by Acquisitions

• SPH REIT (SGX:SK6U)’s revenue and NPI both came in line with our full-year forecast at ~76%, growing 7.2% y-o-y, mainly due to contribution from The Rail Mall and Figtree Grove Shopping Centre (FGSC) which were completed in Jun 2018 and Dec 2018, respectively. See SPH REIT's announcements.
• SPH REIT's 9MFY19 DPU was 4.14 Scts versus 4.11 Scts last year, making up 72% of our full-year forecast as the REIT retained some of its income. However, we deem this to be in line as we expect SPH REIT to declare higher dividends in 4QFY19.
• SPH REIT's balance sheet remains robust with gearing of 30.1% and stable funding cost of 2.89%.

Strong Rental Reversion Seen Across the Malls

• Strong seen all malls. The Rail Mall the strongest rental of 91% on the 21% of Paragon at 86% on 21% of the Clementi Mall at 58% on 10% collectively translated to a portfolio rental reversion of 8.4%.
• In FY19, SPH REIT has little left to renew for Paragon (0.6% of total NLA) and Clementi (1% of total NLA), while the Rail Mall has 57.3% of NLA to be renewed in FY19.

Large Amount Clementi Mall in FY20

• The high Clementi Mall of 71% is something to watch SPH REIT’s total NPI in 9MFY19. The high the REIT to reconfigure and possibly improve rental rates. Given the strong footfall in the mall and track record of a high tenant retention rate, the renewals should yield favourable results.
• In 9MFY19, visitor traffic for its Singapore assets grew by an encouraging 4.4% y-o-y while tenant sales were also higher.

Maintain HOLD

• We maintain our FY19-21 DPU forecasts and DDM-based target price.
• We like the niche position of its malls, but it lacks major re-rating catalysts.
• Upside risk: Large accretive acquisitions.
• Downside risk: Slower-than-expected rental reversion.

Source: CGS-CIMB Research - 12 Jul 2019