1H FY21/22 – Beneficiary of big ticket consumer spending ahead of GST hikes

  • Revenue and NPI for 1H FY21/22 rose 2.9% and 7.2% to S$91.0m and S$69.6m correspondingly
  • Topline trends behind full year estimates while DPU on a 93% pay-out ratio is in line
  • Wisma Atria tenant sales saw a 2.8% y-o-y decline from prolonged restrictions but December festive sales was up 10-12% y-o-y
  • Prime beneficiary of bigger ticket consumer spending ahead of GST hikes
  • We currently have a BUY call with TP of S$0.75

Results Summary

Topline trending behind estimates while DPU is in line with estimates

  • Revenue for 1H FY21/22 increased by 2.9% to S$91.0m
  • NPI for 1H FY21/22 rose 7.2% y-o-y to S$69.6m
  • The higher topline and NPI was attributed to lower assistance granted to portfolio tenants, as well as the cessation of rental rebates in Malaysia alongside the completion of AEI works at The Starhill in Dec’21.
  • Income available for distribution declined 1.3% y-o-y to S$42.7m, due to a once-off deferred income top-up of 0.14 Scts in the corresponding period last year (1H FY20/21). 
  • DPU of 1.78 Scts is in line with estimates on a 93% pay-out ratio.

Singapore retail portfolio trends close to full occupancy

  • Singapore Retail occupancy rates remained healthy at 99.5%, improving c.90 bps h-o-h 
  • Singapore Office segments also trends back above 90% for the first time since the pandemic and closing to pre-COVID range between 90% – 93%. 
  • Overall portfolio improved 60 bps h-o-h to end the period at 96.9%. 
  • AEI at Wisma Atria continues to be a work-in-progress with the next phase of works targeting the Atrium area to start in Mar’22. 
  • Lease expiry is well-staggered with c.6.7% of retail leases and 21% of office leases by gross rents due for expiry. 
  • Amongst the new tenants, Uniqlo notably opened their first retail tore in South Australia at Myer Centre Adelaide, with a c.10k sqft retail space. Renovation for the store is expected to commence in 1Q22.

A tale of two halves for retail sales at Wisma Atria

  • 1H FY21/22 tenant sales saw a decline of 2.8% y-o-y, while shopper traffic rose 19% y-o-y. 
  • The prolonged period of dine-in restrictions, coupled with WFH default saw weaker traffic and spending on weekdays, but saw a reversal going towards year end. 
  • Both tenant sales and shopper traffic saw an upward kink timed with a relaxation of dine-in measures, notable when dine-in was first allowed for up to 2 pax (10-Aug) and 5 pax (22-Nov). 
  • Tenant sales saw a similar festive boost during December period of c.10-12% y-o-y. 
  • With GST hikes (7% to 9%) up in the horizon, or as early as July’22, we think that central malls will be key beneficiaries as consumers bring forward spending on bigger ticket items. Segments such as watches & jewelry, luxury goods, or beauty services could benefit from this. 

Capital Management

  • Entered into a five and a half year unsecured term loan facility agreement of S$60 million
  • New loan facility will be used to refinance current outstanding loan of S$115m ahead of maturity in Sep’22
  • Gearing remains healthy at 36.1%, with 2.8x interest cover and 3.02% average cost of debt. 

We currently have a BUY recommendation with a TP of S$0.75.