Suntec REIT

Suntec REIT: Maybank-KE Reiterate BUY and $1.90 TP. House note that Suntec REIT is its top sector top pick for its DPU CAGR growth of 4% from 2012-2015 (12.5% over three years), following rental reversions from its major overhaul at Suntec City. Note that many Phase 1 tenants have begun operations in Jun-Sep, but they are likely to be still on rent-free periods (1-2 mths). House thus foresee modest rental uplift last quarter and forecast 3Q13 DPU at 2.28c (+1.4% QoQ; -2.9% YoY) and FY13 DPU at 9.23c (-1.9% YoY). Think pre-commitments for Phase 2 should hit at least 85% in 3Q13. Looking at the intensity of the refurbishment works, overall AEI is making good progress and works should wrap up as scheduled by 4Q14. Turnover rents for Retail REITs constitute only about 2-10% of overall FY11-FY12 gross revenue, which should provide some reprieve in the event of a persistent sales slump, as retails rentals are typically contracted for three years.