Suntec REIT - RHB Invest 2020-01-23: FY19 DPU In Line

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SUNTEC REAL ESTATE INV TRUST (SGX:T82U)

Suntec REIT - FY19 DPU In Line

• Suntec REIT (SGX:T82U)’s FY19 DPU of 9.5 cents is in line with our expectations, at 99% of our full-year DPU estimates. While headline DPU for the year declined 4.8% y-o-y, operational DPU ticked up by 0.5% y-o-y.
• FY19 DPU was also impacted by the timing difference between equity-raising and acquisition contributions.

Singapore portfolio committed occupancy rate stood at 99.1%

• On occupancy, Suntec REIT’s Singapore portfolio committed occupancy rate stood at 99.1% (3Q19: 99%), with Suntec City office achieving 100% occupancy during the quarter. Occupancy rates at its office assets in Australia remained flat q-o-q, at 97.8%. Its Singapore retail portfolio occupancy rate also marked a healthy improvement during the quarter, to 99.5% (3Q19: 98.2%), aided by occupancy uplift in Suntec City mall (99.6%).

Key takeaways

• Key positive takeaways on the healthy improvement in operating metrics, with its Suntec City office registering +18% rent reversion in FY19 and Suntec City mall’s rental reversion increasing by 5% y-o-y. Management remains confident of maintaining double-digit rental growth for its office portfolio, and mid-single-digit growth for its retail portfolio in FY20 – with expiring rental being still well below market rates. This, coupled with the healthy occupancy rate improvement, should help deliver organic DPU growth for FY20.
• Three properties – Olderfleet, 21 Harris Street and 9 Penang Road – are expected to come on-stream and contribute to group numbers by end 1H20. These assets are expected to contribute SGD30m in net income annually, equivalent to ~8% of overall income. Pre-committed occupancy rates for all three properties remain high at >93%, including rent guarantees.
• The outlook for its convention space is also positive – with a larger number of corporate events lined up for 2020, compared to 2019.
• Portfolio valuation saw a c.2% uplift, on a slight cap rate compression and the progressive completion of its Australian development assets.

Valuation remains compelling.

• Suntec REIT is trading at 0.9x P/BV, offering a 5.2% dividend yield.
• Suntec REIT remains one of our top commercial REIT picks. We maintain our call and Target Price on this counter.
• See Suntec REIT Share Price; Suntec REIT Target Price; Suntec REIT Analyst Reports; Suntec REIT Dividend History; Suntec REIT Announcements; Suntec REIT Latest News.

Vijay Natarajan RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-01-23

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