Monday, July 22, 2013

Suntec REIT : Suntec City AEI on track (CIMB)

Suntec REIT
Current S$1.53
Target S$1.68
Suntec City AEI on track

 Phase 1 of AEI at Suntec City achieved an average passing rent of S$13.09psf, well on track to meet SUN’s 10.1% ROI target. While 2Q13 was the worst quarter yet, contributions from Phase 1 are expected to flow through in 2H13 and will likely result in a lower DPU top-up. 2Q13 DPU was in line with expectations at 24% of our and consensus full-year estimates (1H13 at 48%). We trim our FY13-15 DPUs by up to 2% on the timing of rental contributions from AEIs. Maintain Outperform and DDM-based target price (discount rate of 8.3%). We see valuation at 0.75x P/BV as attractive vs. peers, with rerating catalysts from the positive execution of Suntec City’s AEI.

Suntec City AEI on track
2Q13 saw SUN’s NPI fall by 38.5% yoy due to the partial closure of Suntec City Mall and Convention Centre. The impact on DPU (-4.7% yoy) was buffered by a larger S$7.8m (S$2.7m in 1Q13) top-up from the Chijmes sale proceeds. But Phase 1 of Suntec City mall AEI is now complete, with average passing rent achieved at a firm S$13.09 (average of S$10.10psf before AEI). The uplift in rents from Phase 1 will flow through in 2H13 and the potential DPU top-up should taper off. SUN guides that it is well on track to achieving its 10.1% ROI target (S$12.59psf) for capex spent on this AEI. Phase 2 is now underway, with 70% of the leases pre-committed so far. With fewer fashion anchors, achieved rents for Phase 2 could be slightly lower than Phase 1. Committed occupancy for the rest of its portfolio stood at 99-100%.  
Office space renewal
New office leases at Suntec City were secured at S$8.42psf, lower than the S$8.55psf done in 1Q13. This is due to a large 90k sf lease signed by one tenant, which warranted a discount. The balance of expiring office leases in FY13 is now down to 6.3% of total.  
Capital management
SUN has secured a S$500m 5-year unsecured loan facility to refinance its debt due in 2013. SUN expects to see some interest costs savings from this exercise. With this, SUN will have no refinancing requirement until 2014. Around 60% of its debt is at fixed rates, and 40% at floating.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 21/07/13

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