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(+) 2Q18 DPU rose 4.7% y-o-y to 1.001 Scts, mainly on acquisitions and divestment gain. ESR-REIT registered a strong 17.6% y-o-y growth in gross revenue to S$32.5m in 2Q18, mainly due to the acquisition of 8 Tuas South Lane and 7000 AMK in December 2017 and rent escalations from several properties, but partly offset by lower contributions from 16 Tai Seng, 21B Senoko Loop and 3 Pioneer Sector 3 post lease conversion to a multi-tenanted structure, expiries, non-renewal of leases at three properties and four property divestments of non-core assets since 2Q17.
Property expenses grew by a lesser quantum, resulting in an NPI boost of c.22% y-o-y to S$23.4m. EBIT interest coverage improved from 3.45x (2Q17) and 3.41x (1Q18) to 3.51x (2Q18). Given similar working capital profiles, OCF also maintained relatively stable y-o-y at S$19.7m (2Q18) vs S$20.3m (2Q17).
Including the partial realisation (S$1.8m of S$6.3m) of gains from sale of two plots to the Singapore Land Authority in 2012-2013, 2Q18 distributable income rose 26.4% y-o-y to S$15.8m – resulting in a higher DPU of 1.001 Scts (+4.7% y-o-y). Given the enlarged share unit base, 1H18 DPU fell 5.7% y-o-y to 1.848 Scts but on an adjusted basis (taking into account the weighted average units in 1Q18), DPU have would have been closer to 2.009 Scts (+2.5% vs 1.96 Scts in 1H17).
Source : DBS Group Research