Suntec REIT - RHB Invest 2016-04-22: 1QFY16 Results

Suntec REIT - RHB Invest 2016-04-22: 1QFY16 Results SUNTEC REIT SUNTEC REAL ESTATE INV TRUST T82U.SI 

Suntec REIT (SUN SP) - 1QFY16 Results 

  • We make no change to our Sell rating, forecast and DDM-derived TP (CoE: 8.0%, Tg: 1.5%) of SGD1.31, FY16 dividend yield of 5.7%. 
  • Highlights 
    • 1QFY16 DPU was up 6.3% YoY to 2.371 cents, meeting 24% of our full year forecasts. 
    • The growth in DPU was mainly driven by distribution from capital. Stripping it off, DPU declined by 0.8% YoY. 
    • Leases secured in Suntec office in 1Q16 was at an average rent of SGD8.67psf/mth (1Q15: SGD9.24psf/mth). 
    • Occupancy for its office portfolio stood at c.98%. 
  • Other takeaways 
    • Management expects its office portfolio to be stable this year as 6.0% of its total office NLA will be due to expire in FY16. 
    • Overall committed passing rent for Suntec City AEI phase reduced to SGD12.00 psf/mth (4Q15: SGD12.04 psf/mth). 
    • While Suntec City AEI committed occupancy inched up by 0.7%. 
    • Balance of c.23% of retail leases expiring in FY16 (4Q15: c.27%). 
    • Development of 177 Pacific Highway is targeted to be completed in 2H16. 
    • Gearing ratio stood at 34.7%, with a healthy interest coverage of 3.6x. 
  • Given our pessimism in the office leasing outlook in the next two years, we note that more than a quarter (c.26%) of its office leases will face renewals in the next two years. In additionally, we are concern over its lease expires in its retail portfolio. 
  • We note that Suntec had only managed to secure c.4% of its retail leases in the recent quarter, which shows slow demand for its retail spaces. In addition, we note that the traffic flow in Suntec Mall is not as heavy as we expect, during our channel checks. Thus, our concerns of renewal risk for its retail portfolio. 



Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-04-22
RHB Invest SGX Stock Analyst Report SELL Maintain SELL 1.31 SAME 1.31


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