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BHG Retail REIT's 1H DPU slashed by more than half to 0.89 cent due to Covid-19 pandemic

Samantha Chiew
Samantha Chiew • 3 min read
BHG Retail REIT's 1H DPU slashed by more than half to 0.89 cent due to Covid-19 pandemic
BHG Retail REIT is clearly suffering from the negative impacts of Covid-19, as it declared an 80% plunge in 1H DPU
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The manager of pure-play China Retail REIT BHG Retail REIT announced a DPU or 0.89 cent for 1H20, a significant 80.1% drop from 2.08 cents declared in 1H19, with distributable amount to unitholders plunging by 52.1% to $4.3 million from $9.0 million in 1H19.

As at end-June, the REIT’s portfolio comprises six retail properties, Beijing Wanliu (60%), Hefei Mengchenglu, Chengdu Konggang, Dalian Jinsanjiao and Xining Huayuan located in Tier 1, Tier 2 and other cities of significant economic potential in China.

Gross revenue for the period came in at $27.8 million, 27.0% lower than $38.1 million a year ago.

The fall in revenue was mainly due to the rental rebates given to eligible tenants, lower occupancy and footfall amid the Covid-19 outbreak in China.

With a 12.3% y-o-y drop in property operating expenses due to overall shorter operating hours which in line with local government guidelines, government assistance and cost cutting measures, net property income for 1H20 was $16.5 million, which represents a 34.5% drop from the $25.2 million in the previous year.

During the period, the REIT did not record a one-off change in fair value of investment property, as compared to $32.4 million realised last year from the acquisition of Hefei Changjiangxilu mall completed in April 2019.

BHG Retail REIT recognised a foreign exchange loss of $2.4 million in 1H20, compared to gains of $202,000 a year ago.

For the first half of FY20 ended June, cash and cash equivalents stood at $39.2 million.

Overall, the REIT notes that the Covid-19 outbreak has taken a toll on the retail environment in China, especially consumer spending behaviour and the financial performance of retail malls. At this juncture, the full financial impact from Covid-19 is not quantifiable due to new cases still being reported and rapid changes taking place, such as government restrictions and safe distancing measures.

The REIT has guided that it is highly likely that its gross revenue, net property income, amount available for distribution, DPU and cash flow will continue to be affected.

Chan Iz-Lynn, CEO of the manager says, “In tandem with the easing of Covid-19 sentiments in China, our property teams and tenants are collaborating on many fronts to expedite the recovery. Marketing and promotional initiatives has intensified in 2Q20. These include live broadcasts, promotional activities, members chatgroups, and online contests & rewards redemptions. Widespread adoption of live broadcasts can be observed across all our malls. We are also gradually resuming selected in-mall events.”

“Beyond the present disruption, the manager will remain focused on its existing strategy, to own and to manage our community-focused malls that complement the needs of surrounding residents; leverage on these high population density neighbourhoods; and to capitalise on the longer-term residents’ income growth and consumption upgrade,” she adds.

Units in BHG Retail REIT closed 6.25% higher on Aug 7 at 60 cents.

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