STI : 3,213.26
(Upgrade from HOLD)
Price Target : 12-Month S$ 1.91 (Prev S$ 1.99)
Nascent shoots of "growth"
• 2Q13 DPU of 2.249 Scts in line
• Phase 1 of Suntec Mall reopens; positive vibes from mall visit
• Upgrade to BUY, TP S$1.91
DPU of 2.249 Scts in line. Due to AEI works at Suntec Mall (phases 1 and 2), Suntec REIT’s 2Q13 topline and net property income were 34% and 39% lower y-o-y at S$46.9m and S$28.0m, respectively. This was partly offset by higher revenue from its office which continues to enjoy high occupancy of 99.7% with leases secured at S$8.42 psf/mth in the quarter.
Distributable income of S$43.1m was boosted by capital top-up of S$7.8m, bringing income available for distribution to S$52.3m (-4.0% y-o-y), translating to a DPU of 2.249 Scts. Looking ahead, Suntec REIT is expected to enjoy interest savings through a new 5-year unsecured facility at an all-in-cost of 1.5% (vs 2.68% average debt cost). Funds will be used for refinancing near term debt-and working capital.
Positive vibes from a walk-through of Phase 1 of Suntec Mall. We liked what we saw at the reopening Phase 1 of Suntec City Mall with 99.6% of space committed and achieving a passing rent of S$13.09psf/mth. The manager shared that Phase 2 is 70% pre-committed to date, which we view positively as it will reduce leasing risks when it reopens towards the end of 2013. Looking ahead, while we expect some income top-up going into P2 works, we note that the most intensive phase of the AEI is over. Through careful planning and execution, the REIT is likely to see stable earnings, without the need for further substantial top-ups to maintain distributions.
Upgrade to BUY, TP S$1.91. With improved precommitments and earnings visibility going forward , we remain optimistic that the transformation of Suntec City Mall will have a positive impact on the REIT’s earnings and capital values in the medium term. Valuations are attractive (0.8x P/BV, forward yield of c6.0%) and we believe negatives have been priced in. As such, we upgrade Suntec REIT to a BUY, with revised TP to S$1.91 after adjusting for higher risk free assumptions.
Source/Extract/Excerpts/来源/转贴/摘录: DBS Vickers Research
Publish date: 22/07/13