SPH REIT (SGX:SK6U): What Can We Expect In The Future?
Based on SPH REIT’s (SGX:SK6U) earnings update in August 2018, analyst forecasts seem bearish, with earnings expected to decline by -6.8% in the upcoming year. However, compared to its 5-year track record of the average earnings growth rate of -7.7%, this is still an improvement. Currently with a railing-twelve-month profit of S$138m, the consensus growth rate suggests that earnings will drop to S$128m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
View our latest analysis for SPH REIT
How is SPH REIT going to perform in the near future?
Longer term expectations from the 6 analysts covering SK6U’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of SK6U’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 5.6% based on the most recent earnings level of S$138m to the final forecast of S$156m by 2021. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of SGD0.051 in the final year of forecast compared to the current SGD0.054 EPS today. Margins are currently sitting at 65%, which is expected to expand to 67% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For SPH REIT, I’ve compiled three important aspects you should further research:
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Valuation: What is SPH REIT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SPH REIT is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SPH REIT? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
