Suntec REIT

UOBKayhian on 19 Mar 2014

FY14F DPU (S$ cent): 9.8
FY15F DPU (S$ cent): 10.7

Private placement to raise S$350m. Suntec REIT has announced a private placement of 216.7m -222.2m new units at an issue price of S$1.575-1.615 per new unit to raise gross proceeds of S$350m. Net proceeds will amount to S$341m after fees, based on the maximum price. Lead managers and underwriters are DBS Bank, Standard Chartered and HSBC. Issue price at 4.1-6.5% discount to the VWAP of S$1.6839 per unit on 18 March. The new units will increase the number of units in issue by at least 9.6% from 2,270.5m units in issue as at 31 Dec 13. Management has also indicated that there is also an option to further upsize the placement. Estimated advanced distribution of 2.096 S cents for current unitholders for the period from 1 Jan 14 to 26 Mar 14, prior to the issue of new units. The next distribution will comprise Suntec REIT's distributable income from 27 Mar 2014 to 31 Mar 2014.

Maintain BUY with an unchanged target price of S$2.12 based on DDM (required rate of return: 7.1%, terminal growth: 2.2%). We maintain our estimates pending further details on the placement and acquisitions. Key risk would be DPU dilution (3.9-4.9%) from the additional units in issue if acquisitions are delayed.