Should Dividend Investors Buy Lendlease REIT After FY2022 Earnings?

Retail REIT

Tim Phillips

August 11, 2022

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Amid high inflation and rising interest rates, the share prices of Singapore’s REITs have held up relatively well. That’s partly because REITs provide a reliable stream of income, even during market volatility.

While most Singapore investors focus on the bigger REITs, there are other dividend-paying options. One that is closely watched is Lendlease Global Commercial REIT (SGX: JYEU).

This younger REIT – which only listed on the SGX in October 2019 – recently reported its H2 and FY2022 earnings. These were the REIT’s numbers for the six and 12 months ending 30 June 2022.

So, with Singapore inflation picking up, are Lendlease REIT’s shares worth buying for those of us seeking out a higher yield? Let’s find out.

H2 2022 DPU rises 4.9%

As a quick reminder, Lendlease REIT owns three properties; [email protected] and Jem, both in Singapore, and a collection of three commercial buildings named Sky Complex in Milan, Italy.

It also possesses a plot of land on Grange Road that is currently being redeveloped.

As for the REIT’s second-half results, its net property income (NPI) rose 72.9% year-on-year to S$45.9 million.

That jump was primarily attributable to the accretive acquisition of Jem and a better operating performance from at [email protected]

As for the crucial distribution per unit (DPU), effectively its dividend per share, Lendlease REIT saw a decent uplift.

The increase in the DPU for H2 2022 came to 4.9% year-on-year to 2.45 Singapore cents. This includes the advance distribution of 1.1371 Singapore cents for the period from 1 January to 30 March 2022.

New shares and DPU payment date

Readers should remember that Lendlease REIT also issued an additional 345.5 million units in a preferential offering.

That was done at a price of S$0.72 per unit (with the new units trading in late April) and helped the REIT fund its acquisition of Jem.

It also explains why its DPU growth was substantially slower than the growth for both NPI and distributable income.

Lendlease REIT will pay out a DPU of 1.3128 Singapore cents (for the period from 31 March to 30 June 2022) to eligible shareholders on 14 September 2022. Units will go ex-dividend on 17 August 2022.

Portfolio resilient amid positive rental reversions

The REIT had a solid second half of its FY2022. As of 30 June 2022, overall portfolio occupancy stood at 99.8%. That was just a smidge lower than the 99.9% as of 31 March 2022.

On the retail portion of its portfolio, [email protected] continued to be the standout with a 99.9% occupancy rate while Jem notched up a 99.5% occupancy rate.

Rental reversions for both have been positive with [email protected] registering a positive number of +3.6%.

Both malls are seeing strength in the retail recovery as its tenants’ sales return to pre-pandemic levels (see below).

Lendlease REIT tenant sales

Source: Lendlease Global Commercial REIT H2 and FY 2022 earnings presentation

Even though visitation numbers are slightly below pre-pandemic levels, it’s an impressive jump up given the Singapore economy’s progressive reopening.

Robust fundamentals, attractive dividend yield

Lendlease REIT continued to display its strong financial profile in its latest earnings report.

As of 30 June 2022, the REIT had a gearing ratio of 40% and a weighted average debt maturity of 2.8 years.

However, after carrying out a refinancing in late July of debt due in FY2023, it now no longer has any debt due until FY2024.

Its interest coverage ratio (ICR) is also a healthy 9.2 times.

For dividend investors, it remains an attractive reopening investment. At its current unit price of S$0.82, Lendlease REIT provides income hunters with a 12-month forward dividend yield of 6%.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.