Result first take: resilient earnings
- FY22 distributable income fell slightly by 1.7% to HK$431m
- Despite negative rental reversion, revenue stayed stable
- Interest costs for 68% of total borrowings were hedged
Sunlight REIT’s FY22 distributable income fell 1.7% to HK$431m, slightly above our estimate.
The decline was mainly led by a higher interest expense.
Payout ratio stayed largely unchanged at 97.4% (FY21:97.5%), distribution income was 1.8% lower at HK$420m.
Final DPU was declared at HK$0.128. Together with an interim distribution of HK$0.122, total DPU comes to HK$0.25, down 2.3% y-o-y
Despite negative reversionary growth, revenue remained stable at HK$803m, thanks to a higher average occupancy rate and lower amortised rental concession.
Sunlight REIT recorded negative rental reversion of 5.5% and 5% for its office and retail portfolios, respectively, in FY22.
The office and retail portfolios exhibited high retention rates of 82% and 77% respectively.
While the occupancy rate for retail portfolio fell to 94.5% in Jun-22 from Jun-21’s 96.5%, occupancy rate for office portfolio moderately improved to 94.8% in Jun-22 from Jun-21’s 92.4%.
With cost to income ratio remained flat at 20.1% (FY21: 20%), NPI stayed stable at HK$641.9m (FY21: HK$639.7m)
Cash finance cost rose 7% reflecting higher funding costs and increased average borrowings.
In Jun-22, Sunlight REIT had total borrowings of HK$4.41bn. This translated into gearing of 23.3%. By unwinding certain IRSs of an aggregate notional amount of HK$500m, the proportion of fixed rate borrowings was reduced to c.68% from Jun-21’s 80%.
With an estimated budget capex of HK$20m, the first phase of the refurbishment of Metro City Ph 1 property will commence in Sep-22.