Friday, January 24, 2014

Suntec REIT

Suntec REIT’s 4Q13 results came in at the higher end of estimates, with distributable income at $58.2m (+11% y/y, 12% q/q), alongside DPU at 2.56¢ (+10% y/y, +12% q/q), inclusive of a 0.175¢ capital distribution support. The latest DPU contributions took FY13 DPU to 9.33¢, translating to an annual yield of 6%. Gross revenue rose 30.2% to $71.6m and NPI grew 62.9% to $49.8m, buoyed by the opening of Suntec City mall (Phase 1) and Suntec Singapore following the completion of its AEI works, and the better than expected performance of the group’s office portfolio and jointly controlled entities. The REIT's office portfolio occupancy was near full at 99.6%, and its retail portfolio at 97.3%, while operationally, Suntec guides that its major AEI tracking well within management’s target, with 97% of Suntec’s Phase 2 NLA being pre-commited. Phase 2 works will complete in April while Phase 3 AEI will commence next month. Fundamentally, the group’s balance sheet remains fair with an aggregate leverage of 38% with an average financing cost of 2.5%. and a debt tenor of 2.4 years. Going forward, the REIT guides that its current priorities are to focus on the smooth execution of Phase 2 and 3 of the AEI as well as proactive lease management to strengthen the lease commitments and maintain the high occupancy level of its office and retail portfolios. At the current price, Suntec REIT trades at an undemanding annualized 4QFY14 yield of 6.4% and 0.75x P/B, versus its peers average of 6.6% forward yield and 0.84x P/B. Latest broker ratings as follows: Maybank-KE maintains Buy with TP $1.75 CLSA maintains O/p with TP $1.75

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