Suntec REIT delivered a good set of 3Q12 results, in our view. Despite the partial closure of Suntec Singapore and Suntec City Mall for Phase 1 of the asset enhancement works (AEI) and divestment of Chijmes, DPU only showed a 7.2% YoY dip to 2.35 S cents. For 9M12, DPU totalled 7.164 S cents (-3.9%), forming 78%/77% of our/consensus full-year DPU forecasts. We note that office segment continued to be the star performer in 3Q, registering a 10.3% YoY growth in revenue to S$31.4m amid positive rental reversions. In particular, Suntec City Office achieved its second consecutive quarter of full occupancy. Leasing demand had also been strong, as evidenced by the average contracted rent of S$8.96 psf pm secured for the quarter (vs. S$8.71 in 2Q). On its Suntec City AEI, Suntec REIT reiterated that the Phase 1 works is on schedule for completion by 2Q13. We understand that pre-commitment for Phase 1 NLA improved to 71.2% from 58.5% in 2Q, and projected ROI of 10.1% remains on track. We are upgrading Suntec REIT to BUY with a revised fair value of S$1.70 (S$1.45 previously).
Better-than-expected 3Q results
Suntec REIT delivered a good set of 3Q12 results, in our view. Despite the partial closure of Suntec Singapore and Suntec City Mall for Phase 1 of the asset enhancement works (AEI) and divestment of Chijmes, NPI and distributable income showed only a 19.5% and 6.3% YoY decline to S$38.4m and S$52.8m respectively. DPU, on the other hand, dipped 7.2% to 2.35 S cents, coming in ahead of our projection. For 9M12, DPU totalled 7.164 S cents (-3.9%), forming 78%/77% of our/consensus full-year DPU forecasts. No proceeds from Chijmes sales, we note, were used to cushion the fall in 3Q DPU.
Sturdy scorecard from office segment
The office segment continued to be the star performer in 3Q, registering a 10.3% YoY growth in revenue to S$31.4m amid positive rental reversions. In particular, Suntec City Office achieved its second consecutive quarter of full occupancy. This helped to maintain the overall office occupancy at 99.9%. Leasing demand had also been strong, as evidenced by the average contracted rent of S$8.96 psf pm secured for the quarter (vs. S$8.71 in 2Q). With only 1.6% and 19.7% of its total office leases expiring in FY12 and FY13, we expect its office performance to remain positive, which should alleviate the weakness at its retail segment (-25.3% in 3Q revenue).
Upgrade to BUY
Suntec REIT also updated that it had completed all its refinancing needs for 2012, having obtained a 5-year facility to refinance its S$200m loan due Oct 2012. On its Suntec City AEI, Suntec REIT reiterated that the Phase 1 works is on schedule for completion by 2Q13. We understand that pre-commitment for Phase 1 NLA improved to 71.2% from 58.5% in 2Q, and projected ROI of 10.1% remains on track. We now incorporate the positive developments into our model. Rolling our valuation to FY13, our fair value rises from S$1.45 to S$1.70. Upgrade Suntec REIT to BUY from Hold on attractive upside. The stock is also trading at the lowest P/NAV of 0.81x among its comparable peers in the S-REIT sector, which we view is unwarranted given its quality assets, strong management and growth potential.
Suntec REIT delivered a good set of 3Q12 results, in our view. Despite the partial closure of Suntec Singapore and Suntec City Mall for Phase 1 of the asset enhancement works (AEI) and divestment of Chijmes, NPI and distributable income showed only a 19.5% and 6.3% YoY decline to S$38.4m and S$52.8m respectively. DPU, on the other hand, dipped 7.2% to 2.35 S cents, coming in ahead of our projection. For 9M12, DPU totalled 7.164 S cents (-3.9%), forming 78%/77% of our/consensus full-year DPU forecasts. No proceeds from Chijmes sales, we note, were used to cushion the fall in 3Q DPU.
Sturdy scorecard from office segment
The office segment continued to be the star performer in 3Q, registering a 10.3% YoY growth in revenue to S$31.4m amid positive rental reversions. In particular, Suntec City Office achieved its second consecutive quarter of full occupancy. This helped to maintain the overall office occupancy at 99.9%. Leasing demand had also been strong, as evidenced by the average contracted rent of S$8.96 psf pm secured for the quarter (vs. S$8.71 in 2Q). With only 1.6% and 19.7% of its total office leases expiring in FY12 and FY13, we expect its office performance to remain positive, which should alleviate the weakness at its retail segment (-25.3% in 3Q revenue).
Upgrade to BUY
Suntec REIT also updated that it had completed all its refinancing needs for 2012, having obtained a 5-year facility to refinance its S$200m loan due Oct 2012. On its Suntec City AEI, Suntec REIT reiterated that the Phase 1 works is on schedule for completion by 2Q13. We understand that pre-commitment for Phase 1 NLA improved to 71.2% from 58.5% in 2Q, and projected ROI of 10.1% remains on track. We now incorporate the positive developments into our model. Rolling our valuation to FY13, our fair value rises from S$1.45 to S$1.70. Upgrade Suntec REIT to BUY from Hold on attractive upside. The stock is also trading at the lowest P/NAV of 0.81x among its comparable peers in the S-REIT sector, which we view is unwarranted given its quality assets, strong management and growth potential.
No comments:
Post a Comment