STI : 3,067.57
Price Target: 12-Month S$0.87
New Kids on the Block
Minimal lease expiry in 2013; organic growth a main driver in 2014
Low gearing of 29.4%, with strong balance sheet metrics
BUY, TP S$0.87
Organic growth the main earnings driver. With all of their expiring leases for 2013 already renewed (SBREIT renewed 2.2% of NLA during the quarter), SBREIT has nil leasing risk for the remainder of 2013. Looking ahead, with portfolio occupancy rates already near full capacity (c.99.8% as of Sept’13) and expected to remain resilient, growth is likely to be driven by higher rental rates. SBREIT will be renewing close to 16% of the portfolio NLA (a majority coming from Eightrium and Tuas Connection) in 2014 and we expect reversions to remain positive. This is because of low passing rent levels that are up to c.10% below current market rates.
Low gearing of 29.4%; average debt maturity of 3.0 years. Gearing has remained steady at 29.4%, with NAV at 0.80 Scts. Currently below management’s longterm target of c.35%, we believe that acquisitions are likely to materialise, albeit at a more selective stance. On that front, assuming a target gearing level of c.35%, SBREIT could potentially acquire up to c.S$70m worth of industrial properties, which is expected to be accretive.
Maintain BUY, TP S$0.87. Trading at 0.9x P/BV and offering attractive FY13-15 forward yields of c.7.6%- 8.5%, SBREIT offers one of the highest yields among peers.
Publish date: 19/12/13