CREDIT VIEW
(+) Strong liquidity profile. No more than 21% of debt matures within the next 3 years, with S$300mn perpetual bond callable in 30 Aug 2024. We foresee low short-term liquidity needs, especially with SPH REIT’s leverage ratio at 29.5%, allowing a debt headroom of S$878mn (keeping asset values constant), while allowing asset values to fall 40% (keeping debt levels constant) before the MAS limit of 50% is breached. As a benchmark, retail asset prices fell roughly 11% in the GFC.
(+) Up to 6 months of zero rental income before interest coverage falls below 1. Based on FY19 GRI, SPH REIT can forego 6 months of rental income before the year’s EBIT is unable to cover interest expenses and perpetual distributions. We note that this buffer is adequate as Singapore enters Phase 2 of reopening just 3 months after the start of circuit breaker measures on 7 April.
Timothy covers credit analysis of local and foreign bonds. Previously an equity dealer, he handled equity trade execution and portfolio management. He has presented seminars for organisations such as SIAS, SPH and IRAS, commentated live market updates for 93.8FM, and authored investment articles for the Business Times newspaper. He graduated with a Bachelor of Commerce in Accounting & Finance from the University of Western Australia.