3Q23 operational update – Weak AUD a wet blanket
- PGNREIT reported 9M23 gross revenue of S$215.6m (+1.2% y-o-y), led by a 2.4% growth from Singapore assets
- Portfolio occupancy remains high at 98.1%, Paragon mall tenant sales continue to operate at c.95% of pre-COVID levels as we await stronger tourist footfall and spend
- Low gearing at 30% with healthy ICR ratio at 3.8x; Eyes will be on PGNREIT’s perpetuals that will come due in Aug-24, we expect a negative 2 to 4% impact to FY24 / FY25 DPUs on a coupon reset
- Maintain BUY with TP of S$1.05
Robust performance in Australia assets offset by currency exchange. PGNREIT reported 3Q23 revenue of S$72.5m (up 1.3% q-o-q), bringing 9M23 gross revenue to S$215.6m (+1.2% y-o-y). Gross revenue from Singapore assets rose 2.4% y-o-y to S$157.4m. Australia assets registered a stronger y-o-y revenue growth at 5.4% in AUD, but a 3% decline in SGD terms as foreign exchange headwinds persist.
SG assets at full occupancy, Paragon Mall still awaits stronger tourist receipts. Occupancy remains healthy at 98.1% across the portfolio – Singapore occupancy stood at 100% across all three assets for the quarter, while Westfield Marion and Figtree Grove in Australia ended the quarter at 97.1% and 96.4% occupancy respectively. No rental reversions were reported for the quarter, as we await more details post analyst briefing. We recap that 1H23 was the first period that PGNREIT’s portfolio reversionary rents turned positive at +7%, led by Paragon mall (+12%). Paragon mall’s tenant sales and footfall remained stable on a q-o-q basis, hovering at c.95% of pre-COVID levels; Clementi Mall’s tenant sales has surpassed pre-COVID levels on a YTD basis, trending similar to suburban mall performance amongst S-REIT peers.
Stable and low gearing, one third of loan book to be due in FY24. Gearing stood at 30.1% for the period end, with fixed debt of 85%. Average cost of debt stood at 4.20%, while ICR ratio remains at a healthy 3.8x (adjusted ICR ratio at 3.1x). There will be no further debt to be refinanced for the remainder of FY23, while S$520m worth of renewals will be due for FY24 (c.33% of total loan book), including PGN REIT’s S$300m worth of perpetuals to be due in Aug-24. Our previous analysis shows that a reset of perps coupon rates at c.200 bps higher will see a c.1.7% and 4.0% decline in our distributable income for FY24/ FY25.
We maintain BUY with current TP of S$1.05, current FY23F yield at 5.9%.
3Q23 Operational Update
| Key Financial Metrics | 3Q23 | 1H23 | %q-o-q | 3Q22 (Aug-22) | %y-o-y |
| Gearing | 30.1% | 28.9% | 1.2 ppt | 30.0% | 0.1 ppt |
| Average cost of debt | 4.20% | 4.05% | 0.2 ppt | 1.77% | 2.4 ppt |
| ICR (x) | 3.8 | 4.4 | -0.6 | 7.9 | -4.1 |
| Key Operational Data | 3Q23 | 1H23 | % q-o-q | 3Q22 (Aug-22) | % y-o-y |
| Portfolio occupancies | 98.1% | 98.1% | 0 ppt | 97.5% | 0.6 ppt |
| WALE (years, GRI) | 3.1 | 3.0 | 10 ppt | 3.0 | 10 ppt |
| Rental Reversions | 3Q23 | 1H23 | % q-o-q | 3Q22 (Aug-22) | % y-o-y |
| Paragon | n.a. | 12.5% | -2.7% | ||
| Singapore Assets | 10.1% | -2.6% | |||
| Westfield Marion | -8.8% | -3.7% | |||
| Figtree Grove | -11.8% | -4.7% |