Suntec REIT Analysis @ 16 August 2020

Basic Profile & Key Statistics

Suntec REIT (Suntec) invests in Office, Retail and Convention Centre properties. I've classified the convention centre as Hospitality sector as its purpose is similar to event halls in hotels. The above sector breakdown is weighted by NPI.

Lease Profile

Occupancy is high at 98.2%. WALE is short at 2.95 years where highest lease expiry of around 25% falls in FY2021. Weighted average land lease expiry is slightly long at 73.32 years.

Debt Profile

Gearing ratio is high at 41.3%. Cost of debt is slightly low at 2.6%. Fixed-rate debt is low at 68%. Unsecured debt is slightly high at 81.2%. Interest cover ratio is low at 2.7 times. WADE is long at 3.35 years where highest debt maturity of around 28% falls in FY2024.

Diversification Profile

Suntec is not diversified in terms of geographical and property where its top geographical and top property contribute 82.9% and 56.9% respectively. It is, however, diversified in terms of tenants where top tenant and top 10 tenants contribute 3.5% and 20.3% respectively.

Key Financial Metrics

Property yield and distribution on capital are low at 2.9% & 2.3% respectively. Management fee is not competitive in which unitholders receive S$ 4.52 for every dollar paid. Distribution margin is moderate at 51.6%. 5.8% of the past 4 quarters distribution is from asset disposal. Suntec did not top up DPU with distribution from asset disposal for the past 2 quarters. Income support of 0.8% is from the income guarantee of 21 Harris Street.

Related Parties Shareholding

As compared to SREITs median, sponsor and manager holding lesser stake while directors of REIT manager holding higher stake.

Trend

Even pre-COVID time, DPU is on a slight downtrend. NAV per unit and distribution margin maintained more or less the same for the past 5 years.

Relative Valuation

i) Average Dividend Yield  - Apply past 4 quarters DPU of 8.005 cents to average yield of 5.44% will get S$ 1.47. If we take the DPU without retention, it would be around 8.175 cents, which will give us S$ 1.50. 

ii) Average Price/NAV - Average value is at 0.84, apply the latest NAV of S$2.092 will get S$ 1.76.

Author's Opinion

Favorable	Less Favorable
Diversified Sector	WALE
Occupancy	Gearing Ratio
WADE	Interest Cover Ratio
Top Tenant & Top 10 Tenants Contribution	Top Geographical Contribution
	Top Property Contribution
	Property Yield
	Management Fee
	Distribution on Capital

Suntec convention is closed from 7 Apr 2020 due to COVID. Retail business has shown signs of recovery but convention centre performance would remain weak. Olderfleet, 477 Collins Street is expected to start contribution in August, though it may not has much impact on the DPU. 

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.