Suntec REIT

Suntec REIT: CLSA notes that Suntec’s $350m placement came as a surprise given the manageable gearing and sterling track record of not having to raise equity to lower gearing. With no acquisition target in sight, House estimate a dilution of~5% (assuming proceeds used for debt repayment). However, CLSA expect an acquisition in Singapore or Australia to be announced soon. An acquisition in Australia would yield economic merits given higher NPI yields but negative on a strategic view while a Singapore acquisition makes most sense to us given the recovering office market. CLSA retains Outperform rating on Suntec REIT with $1.75 TP, on the back of good execution at Suntec mall and exposure to Singapore office recovery.