Suntec Reit in focus

suntec reit

Hold. Due to headwinds in the retail sector, we believe that earning upside is capped.

ALP REIT INVESTMENT CLUB

Suntec reit (T82U)

(13 OCT 2016) close price: S$1.705

12M-Target price: S$1.71

Distribution Yield: 4.36%

1.) Type of Reit: Retail & Office REIT

2.) Number of property in the portfolio:  6 properties in total.

Suntec REIT’s portfolio comprises 60.8% interest in Suntec Singapore, a one-third interest in One Raffles Quay, a one-third interest in Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall (the “MBFC Properties”) and 30.0% interest in Park Mall.

Suntec REIT also holds a 100% interest in 177 Pacific Highway, an iconic landmark office development in North Property Portfolio Sydney which is scheduled to be completed by the second half of 2016.

 3.) Countries that the business operates in: Singapore & Australia only

4.) Top 5 properties that generates the highest revenue (Decreasing order): Suntec Singapore Convention& Exhibition Centre; One Raffles Quay; Marina Bay Financial Centre Towers 1 and 2; the Marina Bay link Mall; Park Mall.

5.) Weighted average lease expiry (WALE) profile:

lease

6.) Debt maturity profile:

debt

7.) Challenges: Tenants at phase 1 of Suntec mall entering first reversionary cycle in 2016, weak operating climate in Singapore. 

 8.) Strengths:

  • Diversified risk by inclusion of Australian assets Completion of 177 Pacific Highway (Sydney) project
  • Acquisition of Southgate Complex
  • Proactively managed lease expiry profile
  • Only 1.8% office Net Lettable Area and 7.9% retail Net Lettable area is up for renewal in 2nd half of 2016

9.) Significant events:

  • Acquired 50% interest in Southgate complex in Australia – press release on 5th august 2016
    • 88% occupancy
    • WALE: 6 years
    • Annual rental escalation: 3-4%
  • Sold park mall in June, 2015
  • Suntec City Mall (Phase 3) open in 2016

10.) TABLE: 

suntec-data

11.) Recommendation: Hold. Due to headwinds in the retail sector, we believe that earning upside is capped. In addition, there could be downside risk for the REIT’s office assets, which are expected to see some volatility in occupancies and rents when new office supply enter CBD from 2016 onwards.

DISCLAMER: Readers should not rely solely on information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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