Analysts are positive on Suntec REIT as it has shown growth from its local and overseas portfolios. This came on the back of the REIT announcing its latest 3QFY2021 ended September results, which saw distribution per unit (DPU) increase by 20.8% y-o-y to 2.232 cents.
Distributable income was 22% higher y-o-y at $63.7 million, while gross revenue improved by 16.5^ y-o-y to $92.7 million. Net property income saw a 45.5% y-o-y growth to $68.8 million.
The manager of the REIT attributes the stronger performance to contributions from the two newly acquired assets in London and the completed development of 477 Collins Street, Melbourne, as well as lower rent assistance for retail tenants in the current period.
In addition, the office portfolio in Singapore, Australia and United Kingdom remained resilient, providing income stability to unitholders, as it benefits from cumulative positive reversions in the past 13 quarters.
See: Suntec REIT posts DPU of 2.232 cents for 3Q21, up 20.8% y-o-y
With that, UOB Kay Hian is keeping its “buy” recommendation on Suntec REIT with a target price of $1.78.
Analyst Jonathan Koh has an overall neutral outlook for office in 2020, as market rent is expected to recover due to the demand from the technology, media and telecommunications (TMT) sectors and limited supply of Grade A office space within the core CBD in Singapore.
Standard Chartered Bank intends to vacate from nine floors at MBFC Tower 1 in 4Q2022 and management plans to backfill the space with smaller tenants, which will provide higher rentals on a psf basis.
Meanwhile, expiry rents at Suntec City Office are higher at $9.32 psf in 2022, compared with the current passing rent of $9.08 psf. The REIT might incur negative rental reversion during some quarters in 2022 due to efforts to backfill potential vacancies earlier.
As for Suntec City Mall, shopper traffic improved during the start of the stabilisation phase in early-October. The REIT introduced 19 new-to-market or new-to-Suntec brands in 9M2021, of which 50% are new F&B concepts. It plans to future-proof Suntec City Mall by allocating 35% of net lettable area (NLA) for activity-based and experiential concepts, such as cooking studios and game arcades, and another 25% of NLA for F&B.
Koh also sees resiliency from the REIT’s properties in Australia, due to rent guarantees, as well as in UK due to long weighted average lease expiry (WALE).
Sharing similar sentiments, CGS-CIMB Research is maintaining its “add” call on Suntec REIT with an unchanged target price of $1.79.
Lead analyst Lock Mun Yee says, “With a 5.55% FY2021 dividend yield, we think Suntec REIT’s current share price has factored in much of the near-term headwinds.”
Lock also likes the stock for its improving NPI for both office and retail segments.
For more stories about where the money flows, click here for our Capital section
Units in Suntec REIT closed at $1.51 on Oct 26, giving it a FY2021 price-to-book ratio of 0.73 times with a dividend yield of 5.55%, according to CGS-CIMB’s estimates.
Photo: Suntec
