Suntec Reit: Credit Suisse downgrades to U/p and reduces TP to $1.50 from 1.69. Recommend investors take profit, as near-term headwinds from office and retail portfolios could spell downside risks. Expect office demand to shift towards higher-end offices (Prime Grade A only accounts for 36% of Suntec’s assets)…..
Note REIT was best performing REIT over last 6mths despite near-term headwinds from:1) disappointments in retail portfolio as competition weighs on rental growth;
2) potential vacancy risks (after 7 straight qtrs of occupancy growth) as major tenants IDA and Nomura vacate. Believe Suntec is fully valued at 6% FY11E and FY12E yields. House prefers CCT and KREIT which are better positioned to ride the office upcycle.
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