SPH Reit

SPH Reit: Nomura initiates coverage with NEUTRAL and TP of $0.94, based on the average of its NAV estimate and FY14 yield of 5.5%. The Paragon Mall, which accounts for 80% of portfolio value, has a solid operating track record of 100% committed occupancy and a CAGR growth of 7% in rents over the past 10 years. Coupled with limited new supply of prime retail space projected in FY13-14F, Nomura believe there is potential reversion upside for leases expiring in FY14F. Upon completion of the Seletar Mall at end-2014, Nomura believe there is potential for SPH Reit to exercise its ROFR to acquire the asset, which could add 5% to distributable income, assuming entry yield of 5.5% and 75% debt financing at a WACC of 3.6%.