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Wednesday, February 03, 2021

Suntec REIT Review @ 3 February 2021

Basic Profile & Key Statistics

Suntec REIT invests in Office, Retail and Convention Centre properties and owns 11 properties across Singapore, Australia and England.


Performance Review

Gross revenue and NPI and decreased YoY by 12% and 10.4% respectively mainly due to lower income from Suntec Convention and Suntec City, though this was partially offset by contributions from 55 Currie Street and 21 Harris Street. 
Distributable income from operations decreased by 11% YoY. DPU from operations decreased from 4.249 cents to 3.746 cents, which is 11.8% drop.
For Suntec City Mall, tenant sales have been improving since July; 4Q tenant sales is only 12% lower than pre-COVID despite a 41% dropped in footfall. Rental reversion is -10.8% for 4Q and -1.3% for FY20.
As for Suntec City Office, rental reversion is +3.7% for 4Q and +7.7% for FY20.

Lease Profile

  • Occupancy is moderate at 94.8%
  • WALE is slightly long at 4.28 years
  • Highest lease expiry within 5 years is low at 22.1% which falls in 2023
  • Weighted average land lease expiry is slightly long at 72.82 years


Debt Profile

  • Gearing ratio is high at 44.3%
  • Cost of debt is low at 2.53%
  • Fixed rate debt % is low at 61%
  • Unsecured debt % is moderate at 70.7%
  • WADE is moderate at 3.01 years
  • Highest debt maturity within 5 years is low at 20.9% which falls in 2023
  • Interest coverage ratio is low at 2.6 times


Diversification Profile

  • Top geographical contribution is high at 79.5%
  • Top property contribution is high at 54.1%
  • Top tenant contribution is low at 3.5%
  • Top 10 tenants contribution is low at 20.3%

Key Financial Metrics

  • Property yield is low at 2.7%
  • Management fees over distribution is not competitive at 24.6% in which unitholders receive S$ 4.07 for every dollar paid
  • Distribution on capital is low at 2%
  • Distribution margin is slightly high at 51.4%
  • 3.6% of the past 4 quarters DPU is from income support

Trends

  • Flat - NAV per Unit
  • Downtrend - DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin


Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 7.402 cents / average yield @ 5.48% = S$ 1.35
  • Price/NAV - NAV @ S$ 2.063 x average P/NAV @ 0.83= S$ 1.71


Author's Opinion

 Favorable Less Favorable
Diversified SectorHigh Gearing Ratio
Well Spread Lease ExpiryLow Interest Coverage Ratio
Lost Cost of DebtHigh Top Geographical Contribution
Well Spread Debt MaturityHigh Top Property Contribution
Low Top Tenant & Top 10 Tenants ContributionLow Property Yield
 Non Competitive Management Fees
 Low Distribution on Capital
 DPU Downtrend
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

Suntec performance has been affected mainly by lower revenue from Suntec City Mall and Convention. The shortfall in NPI should be able to cover by NOVA properties and those acquisitions which are completed in 2020. However, whether Suntec is able to cover the DPU gap of capital distribution from asset disposal would very much depends on the retail and convention sector recovery, as well as contribution from 9 Penang Road. 


For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*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 a 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.

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