With the JPY having declined almost 20% against the S$, I was expecting a reduction in DPU, everything else remaining equal.
However, all else did not remain equal and instead of a reduction in DPU, an increase to 0.66c is what we have.
What did the management do to improve the DPU?
1. Aggressive buying back of units from the open market.
2. Continual buying of new properties in Japan.
3. Lowering finance cost through loan principal repayments.
4. Improved occupancy from 91.0% to 91.7%.
To be fair, the REIT actually deployed its cash reserves with regards to point 3. Whether it is able to continue doing this depends on their level of cash reserves in future.
So, there is still a possibility that we could see future DPU reducing not just because of a weaker JPY but also because future loan principal repayments could be made from the REIT's income.
However, if it should happen, I believe it to be just short term pain as future DPU could be then enhanced when finance cost becomes reduced further, everything else remaining constant.
I am happy with the numbers reported and will be even happier when income distribution takes place on 22 March 2013.
See announcement: here.
Related post:
Saizen REIT: Still a buy?