Towards a stronger year

■ Retail malls and PBSA showed encouraging performance in 1QFY8/22.
■ Keppel/Cuscaden scheme meeting date will be announced later, pending regulatory approval of composite document/finalisation of IFA opinion.
■ Reiterate Hold. SPH is trading near privatisation offer price.

Resilient tenant sales for its malls

Tenant sales and occupancy of SPH’s retail malls remained resilient in 1QFY22. While Covid-19 restrictions impacted tenants’ sales, they quickly rebounded (to the pre-restriction level) once the restrictions were lifted. In 1QFY22, tenant sales at Paragon and Clementi Mall in Singapore reached 97% of 1QFY21 level; in Australia, Westfield Marion’s tenant sales rose 6% yoy and exceeded pre-Covid level. Figtree Grove’s tenant sales recovered close to pre-Covid 19 levels in Nov 2021 post 3.5 months of lockdown, demonstrating resilient tenant sales. All malls’ occupancy rate remained high at 98-100%.

Strong performance from PBSA

As at end-Nov 2021, SPH’s purpose-built student accommodation (PBSA) revenue for the current UK academic year of 2021/22 (AY21/22) has exceeded its AY20/21 achievement, and accounted for 98.7% of target. It could exceed its AY21/22 revenue target as there are still unoccupied rooms which are currently being marketed for Jan starts or short-term stays. This segment has shown a strong start for AY22/23, with bookings as at the 4th week of Dec 2021 accounting for 29% occupancy, stronger than the 16% in AY21/22 and 28% in pre-Covid-19 AY20/21. It achieved an encouraging 32.7% of target revenue. To boost
income further, SPH is embarking on an asset enhancement initiative (AEI) for its Huddersfield property (scheduled to reopen for AY23/24). The development of two PBSA forward funding projects are on track and scheduled to open for AY22/23.

Building up its aged care portfolio

Average bed occupancy rate at Orange Valley nursing home in Singapore rose from 84% in FY21 to 87% in Dec 2021. However, it faces cost challenges from higher manpower cost, to meet Ministry of Health (MOH) regulations on nursing staff accommodation, enhanced infection control measures and staff quarantine. In Japan, lessees of all six assets continue to pay rent on time. Underlying portfolio occupancy stayed high at >90%. In mid-Oct 2021, SPH added an 80-bed nursing home in Chikusei into its Japan portfolio. This asset came with a land parcel which could be used for future expansion.

Reiterate Hold

On its scheme meetings on Keppel and Cuscaden’s privatisation offers, it is awaiting regulatory approval on the respective composite documents and/or finalisation of Independent Financial Advisor (IFA) opinion; it will announce the timing of the meetings in due course. SPH’s last price of S$2.34 is close to Cuscaden’s revised offer of S$2.36-2.40. Key upside risk: acquisitions. Key downside risk: privatisation falls through.