Monday, July 20, 2015

Soilbuild Business Space REIT

Soilbuild Business Space REIT has been kept at Buy with a higher TP of $0.95 by DBS Vickers primarily due to its recent earnings. The REIT’s second quarter DPU of 1.615¢ was in line with expectations as the REIT saw increased contributions from its recently completed acquisition of 72 Loyang Way.

Coupled with steady occupancy rates of 99.8%, the research house notes that the REIT managed to renew and sign new leases with positive rental reversions of about 1.6 - 5%, in line with expectations, given the current tough operating climate.

With interest costs set to grow, the REIT expects interest costs to rise by about 20 bps from the current 3.49%, post refinancing. This is largely due to the rising costs of hedging.

The research house feels that acquisitions will continue to fuel further growth, with 566 Bukit Batok St 23, a light industry property, expected to be a medium term target. However, with gearing at about 36.1%, the REIT might need to raise funds through equity to partly fund any further acquisitions.

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