BHG Retail REIT beats 3Q 2016 DPU forecast by 4.9%
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China-focused BHG Retail REIT has reported a DPU of 1.29 Singapore cents for its 3Q 2016, beating forecast made at listing by 4.9%.
However gross revenue for the period came in 6% lower than expected at SGD15.4 million (USD10.9 million), while net property income missed its target by 3.5% at SGD9.5 million.
The REIT has attributed the lower figures to new taxes imposed by the Chinese government, and a weaker RMB against the SGD.
Distributable income for the period came in at SGD4.5 million, beating expectations by 5.1%.
“Portfolio occupancy remained high at 97.4%, rents for new and renewed leases turned in another quarter of healthy reversions”, said Chan Iz-Lynn, CEO of the REIT’s manager, in a statement on 11 November.
The REIT’s gearing was at 30.5%, with weighted average term to maturity of 2.2 years.
Moving forward, BHG Retail REIT pointed to China’s growing retail sales figure, which expanded by 10.4% year-on-year for the first three quarters of 2016 despite a slowing global economy, as reasons to be optimistic.
“The higher demand for mid-range retail brands is expected to continue, and will move in tandem with China’s rising middle income population”, said Chan, underscoring her confidence that the REIT’s properties are well positioned for this growth.
Units of BHG Retail REIT finished trading trading day about 0.8% higher from its previous close on the Singapore Exchange to end at SGD0.59.
Questions & Answers
Q.What factors caused BHG Retail REIT's gross revenue and net property income to be lower than expected?
What factors caused BHG Retail REIT's gross revenue and net property income to be lower than expected?
The lower figures were attributed to new taxes imposed by the Chinese government. Also, a weaker RMB against the SGD contributed to these results, causing a miss on the financial targets.
Q.Despite the lower revenue, how did the REIT manage to beat its DPU and distributable income forecasts?
Despite the lower revenue, how did the REIT manage to beat its DPU and distributable income forecasts?
The REIT achieved this through a high portfolio occupancy of 97.4% and healthy reversions for new and renewed leases. Distributable income beat expectations by 5.1%, supporting the DPU beat.
Q.What is the REIT's outlook for future growth, given the current economic climate?
What is the REIT's outlook for future growth, given the current economic climate?
The REIT is optimistic about China’s growing retail sales, which expanded by 10.4% year-on-year for the first three quarters of 2016. It expects continued demand for mid-range retail brands, driven by the rising middle-income population.
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