Suntec REIT

UOBKayhian on 23 Jan 2015

FY15F DPU (cent): 10.4
FY16F DPU (cent): 10.8

Downgrade to HOLD as we see limited upside post the 26% yoy surge in share price. Management remains confident on the office portfolio’s healthy performance with Suntec office occupancies unaffected by the completion of the South Beach project. However, management noted the challenging operating environment for the retail segment that resulted in a drop in Suntec Mall’s overall committed rents compared with the previous quarter. Downgrade to HOLD with a raised target price of S$2.08 (from S$2.05). Entry price is S$1.75.

Downgrade to HOLD post the strong 26% yoy increase in the share price. While we increase target price to S$2.08 (from 2.05) as we roll forward our earnings estimates, we see limited upside from current share price levels. Our valuation is based on DDM (required rate of return: 7.1%, terminal growth: 2.2%). Entry price is S$1.75.