Suntec Reit

Suntec Reit: 3Q12 results in line, taking into account AEI-related disruptions. Revenue and net property income fell 8% and 20% yoy respectively, due to lower income from Suntec City Mall and sale of Chijmes, partly mitigated by higher office revenue. Suntec’s office portfolio continues to perform well with leases at Suntec City secured at $8.96 psf (+2.9% qoq) reflecting the tight supply. Ex AEI, Suntec City Mall’s occupancy was stable at 98.2% although the 193k sf of space under Phase 1 AEI (~23% of total NLA) has been closed. Phase 1 works is on schedule to complete 2Q13 with 71.2% pre-committed (up from 58.5%). Phase 2 AEI will involve a further 380k sf of space. Suntec trades at 0.8x P/B, offers FY13e yield of 5.7%. Deutsche keeps at Hold, given execution and earnings uncertainty with the ongoing AEI at Suntec City Mall, but raises TP to $1.64 from $1.50. Nomura maintains at Buy with TP $1.70. CIMB maintains at Outperform, raises TP to $1.79 from $1.59, says SUntec remains the cheapest large cap S-Reit, with limited DPU downside given buffer from the divestment proceeds from Chijmes.