• SPH REIT's better 9MFY21 revenue driven by acquisition and lesser rental rebates.
• Tenant sales and footfall stabilised with room for more improvement.
• We see pressure on rental reversion easing. Reiterate ADD call on SPH REIT.

Acquisition and Lower Rental Relief Boost SPH REIT's 9MFY21 Results

• SPH REIT (SGX:SK6U)’s 9MFY8/21 revenue rose by 22.2% y-o-y to S$209.6m (-5.1% q-o-q), coming in at 74% of our full-year forecast. The stronger results were mainly driven by recovery in performance across all assets while supported by
  1. additional quarter of financial contribution from Westfield Mario vs last year, and
  2. decrease in rent relief to tenants.
• Despite the weaker q-o-q revenue due to weaker income from Singapore as negative rental reversions kicked in and rental relief granted during heightened alert, SPH REIT’s 3QFY21 DPU of 1.38 scts was up 11.3% q-o-q as the REIT retained income in 1HFY21. Due to this, SPH REIT's 9MFY21 DPU came in at S$0.0382 at 67% of our full-year forecast.
• SPH REIT remains committed to paying out > 95% of total income as dividend. Final payout ratio will be determined in 4QFY21.

Tenant Sales Stabilises While Occupancy Remained High

• Singapore revenue rose 16.3% y-o-y to core focus in maintaining high occupancy with the right tenant mix.

Reiterate ADD on SPH REIT With An Unchanged DDM-based Target Price

• Overall, SPH REIT's management sounded more Australian assets are on the cards.
• On acquisition, SPH REIT's would also consider other asset classes other than retail assets.

• Reiterate ADD. We see rental pressure of vaccines. SPH REIT is trading at an attractive ~6% yield.
• Re-rating catalysts/downside risks include better--than-expected impact from COVID-19.

Source: CGS-CIMB Research - 13 Jul 2021