DPU of 5.02 Scts – above our estimates, translates to a payout ratio of 105% due to tax-related one-offs
Strong reversionary rents for SG assets at 12% for Paragon and 9% for Clementi Mall
Assume the redemption of perpetuals to be refinanced with debt; Gearing to land at c.38%
Maintain BUY, S$1.05 TP on potential takeover
FY23 revenue increased 1.8% y-o-y to S$289 million, while NPI rose 1.7% y-o-y to S$215m.
Distributable income of S$142.2m represents a distribution payout ratio of 105%, as PGNREIT reverses a rollover tax adjustment from Australia to unitholders
Full year DPU of 5.02 Scts was 9% y-o-y lower on higher interest cost and foreign translation losses, but came in above our full year estimates
Operationally, reversions were strong, in our view, and reflective of peers; Paragon delivered double digit reversions at +11.6%, while Clementi mall clocked healthy reversions of +8.7%
Overall portfolio reversions were dragged down by negative reversionary leases in Australia; Westfield Marion at -5.8% and Figtree grove at -11.6%
Portfolio occupancy stable at 98.1%, dragged down by relatively lower occupancies within Australia malls at c.97% – 98%
In terms of valuation, Singapore retail malls Paragon and Clementi saw a 2% y-o-y uplift in valuation on stronger cash flow recovery
Australia assets saw a decline of 5% for Westfield Marion and 7.4% for Figtree Grove on a 50bps cap rate expansion for both properties; Cap rate landed at the 6.0 – 6.5% handle as at 31st Dec 2023.
Capital management remains stable with Paragon REIT having one of the lowest gearing in the sector at 30%
ICR ratio and adjusted ICR ratio ended the year at 3.5x and 2.9x respectively on a higher average cost of debt of 4.3%
Paragon REIT’s S$300m perpetual securities will see a coupon reset come August-24, with management previously discussing the option of redeeming the perpetuals through debt refinancing.
