Suntec REIT

Suntec REIT: Suntec is selling Park Mall for $411.8m, equivalent to its Dec 14 valuation for redevelopment. Together with its JV partners, Singhaiyi and Haiyi Holdings, it will rebuild the property to comprise 2 office blocks and a retail podium, with the right for Suntec to buy one of the office towers on completion. Suntec will fund its share of the redevelopment with the sales proceeds as well as repay debt and potentially provide a buffer for income loss. The impact on NAV would be minimal and the sale would free up capital to enable it to renew its portfolio.

CIMB has lowered their FY16 DPU to 10.3cents to reflect the income loss post divestment, partly mitigated by interest savings from debt repayment. The house maintains its HOLD rating with a lower TP: $1.86 (prev: $1.93).

On the other hand, RHB has also maintained its NEUTRAL rating with TP: $1.81 as the house expects the redevelopment of Park mall to benefit stakeholders only in the longer term, as project is expected to be completed by 2019. Given the competitive landscape in Park Mall’s vicinity, Suntec REIT’s shift in focus to office spaces instead of retail spaces is a strategic initiative.
Lastly, MayBank KE maintains its HOLD rating with TP: $1.89 due to lack of near-term catalysts.