3Q22 Operational Update – Unlocking pockets of opportunity
- High occupancies maintained at 313@Somerset at 99.4%
- Key positives: (i) Positive retail reversions this quarter at single-digit levels, (ii) Distributions from Sky Complex fully hedged on currency terms, (iii) Additional mall GFA at 313@Somerset of 2k-3k sqft to be unlocked in the current exercise
- Datapoints to look out for: (i) Return of tourists in 2H22 calendar year that historically contribute c.20-25% to tenant sales and footfall, (ii) Phased acquisition of PLQ to potentially start by end-23
- Maintain BUY with target price of S$1.06
Operational Update
| Key Financial Metrics | 3Q22 | 1H22 | Variance q-o-q | 3Q21 | Variance y-o-y |
| Gearing | 40.7% | 33.5% | 7.2 ppt | 34.3% | 6.4 ppt |
| Average cost of debt | 0.98% | 0.92% | 0.1 ppt | 0.90% | 0.1 ppt |
| WADE (years) | 1.8 | 2 | (0.2) | 2.3 | (0.5) |
| ICR | 10.3 | 9.7 | 0.6 | 8.8 | 1.5 |
| NAV per unit (S$) | n.a. | 0.81 | – | 0.81 | – |
| Key Operational Data | 3Q22 | 1H22 | Variance q-o-q | 3Q21 | Variance y-o-y |
| Occupancy (313@Somerset) | 99.4% | 99.7% | -0.3 ppt | 98.9% | 0.5 ppt |
| Occupancy (Sky Complex) | 100.0% | 100.0% | 0 ppt | 100.0% | 0 ppt |
| Rental reversions (%) | – | ||||
| WALE (years, GRI) | 4.3 | 4.4 | (0.1) | 4.4 | -10 ppt |
| Tenant Sales (millions) | 44.5 | 84.8 | 5% | 46 | -3% |
| Shopper Traffic (millions) | 5.8 | 11.8 | -2% | 6.6 | -12% |
Key Observation
High occupancy maintained at 313@Somerset at 99.4%; Expect stronger 2H22 results alongside tenant refresh works at Puma, Love, Bonito, and return of tourists which typically contribute c.20% – 25% to footfall and tenant sales
- Occupancy remains high at 313@Somerset, with retention rate at 71.1% by NLA
- Retail reversions continue to be positive at mid single digit level, similar to last quarter
- Tenants are looking to expand space, with potential to lease-up additional GFA to be unlocked at the mall, in the quantum of 2k – 3k sqft.
- Shopper traffic remains flat q-o-q given that 2Q22 (period ending Dec’21) is on a high seasonal base coinciding with December holidays and renovation works at the mall
- Renovation works happening this period include Puma’s first floor retail space (old Forever 21 space) and Love Bonito’s store front.
- Utilities cost remains stable with 313@Somerset (accounts for c.2% of topline revenue) on utilities contracts hedged for another calendar year and Sky complex on triple net lease structure.
- 313@Somerset’s footfall and tenant receipts attributable to tourist receipts is in the range of 20-25%, which should reflect stronger in 2H22 calendar year.
- Gearing will increase to 40.7% when JEM comes into the picture from 33.5% as of 1H22.
- Post JEM acquisition, cost of borrowing is estimated to land at 1.2% with potential savings from sustainability-linked loans and 9.5x ICR.
- Income denominated in Euro from Sky Complex is c.100% hedged for 1.5 years ahead.