Suntec REIT: UBS downgrades Suntec to Neutral (from Buy) and lowered TP to $1.90 (from $1.94).
Although UBS is optimistic about Suntec’s exposure to Grade A office space, the house believes steady growth prospects – which should provide price support – have already been priced in.
Meanwhile, Phase 3 is on track to open at the end of quarter but tenant pre-commitments (~70%) have met with headwinds.
Management’s current focus, therefore, should be to drive up Phase 3 retail occupancy while attracting the right tenant mix.
Retail rental also seems to have cooled off, the house revises down rental assumptions from $12.88psf/month to $12.35psf/month and factored in the one-quarter delay in Phase 3 completion, hence the lower TP.
Catalysts would include positive data points on market rents and occupancies, and stronger pre-commitment levels. Downside catalysts include a sharper or earlier hike in interest rates and further operational delays.
Broadly among SREITs, the house prefers CRCT and CDLHT.
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