FW: SG: Suntec REIT - Take profit on rich valuations
Ye Tian (James)
22 Jul 2016
SUNTEC REIT | SELL
TAKE PROFIT ON RICH VALUATIONS
- 2Q16 DPU flat YoY
- Boost from capital distributions
- Proactive lease management
Suntec REIT’s 2Q16 gross revenue declined 3.1% YoY to S$78.9m. DPU was flat at 2.501 S cents, and was boosted by a distribution from capital amounting
to S$8m (0.316 S cents per unit). Results were in-line with our expectations. Suntec REIT proactively managed its lease expiry profile during the quarter, bringing down both its office and retail lease expiries for the remainder of the year. However, committed
portfolio passing rents continued to soften. We raise our fair value estimate on Suntec REIT to S$1.54 (previously S$1.51), as we factor in a lower risk-free rate assumption of 2.4% (previously 3.0%) in our model. Nevertheless, we maintain our
SELL rating as we believe valuations remain rich. Suntec REIT is trading at 5.6% FY16F distribution yield, which is more than half a standard deviation below its 5-year average forward yield of 6.1%.
(Please see attached file: SUN-160722-OIR.pdf)
Andy Wong Teck Ching, CFA
Disclaimer
This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without the written consent of OCBC Investment Research Pte Ltd (“OIR” or “we”). This
report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein or to participate in any particular trading or investment strategy. Whilst we have taken all reasonable care to ensure that
the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate
contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and
accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to
seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. In the
event that you choose not to seek advice from a financial adviser, you should consider whether investment in securities and the securities mentioned herein is suitable for you. Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), Bank of Singapore Limited
(“BOS”), OIR, OCBC Securities Pte Ltd (“OSPL”) and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek
to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally.
The information provided herein may contain projections or other forward looking statements regarding future events or future performance of countries, assets, markets or companies. Actual events or results may differ materially. Past performance figures are not necessarily indicative of future or likely performance
Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Bank, BOS, OIR, OSPL and their respective connected and associated corporations shall be understood as neither given nor endorsed..
