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Monday, October 25, 2021

Suntec REIT Review @ 25 October 2021

Basic Profile & Key Statistics

Suntec REIT invests in Office, Retail and Convention Centre properties and owns 10 properties across Singapore, Australia and England.

Performance Highlight

Performance has improved YoY due to contribution from Nova Properties, The Minster Building and 477 Collins Street as well as lower retail rent assistant and a one-off surrender fee from 177 Pacific Highway.


3Q rent reversion is at negative 11.2% for Suntec City Mall and positive 7.3% for Suntec City Office.

Tenant sales and footfall have improved as compared to the previous quarters. Tenants sales have recovered slightly to 76% despite footfall at only 49% as compared to 2019.

Related Parties Shareholding

  • There is no official sponsor mentioned in Annual Report
  • REIT manager's shareholding is high at 1.646%
  • Directors of REIT manager's shareholding is high at 8.574%

Lease Profile

  • Occupancy is slightly high at 95.1%
  • WALE is long at 4.55 years
  • Highest lease expiry within 5 years is low at 22% which falls in 2023
  • Weighted average land lease expiry is slightly long at 75 years

Debt Profile

  • Gearing ratio is high at 44.3%. Include perps, gearing is at 47.3%.
  • Cost of debt is slightly low at 2.32%
  • Fixed rate debt % is low at 57%
  • Unsecured debt % is low at 61.3%
  • WADM is moderate at 3.07 years
  • Highest debt maturity within 5 years is low at 19.8% which falls in 2023
  • Interest coverage ratio is low at 2.7 times
  • Preferred/perpetual securities over debt is moderate at 6.3%

Diversification Profile

  • Top geographical contribution is high at 67.3% 
  • Top property contribution is high at 44.2% 
  • Top 5 properties contribution is high  at 84.6% 
  • Top tenant contribution is low at 6.4% 
  • Top 10 tenants contribution is low at 30.6%

Key Financial Metrics

  • Property yield is low at 3%
  • Management fees over distribution is high at 22.6% in which unitholders receive S$ 7.81 for every dollar paid 
  • Distribution on capital is low at 2.2%
  • Distribution margin is moderate at 53.1%
  • 6.2% of TTM distribution is from income support

Trends

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

Relative Valuation

  • P/NAV - Average for 1y; Below average for 3y & 5y
  • Dividend Yield - Above average for 1y & 5y; Above +1SD for 3y

Author's Opinion

 Favorable Less Favorable
Diversified SectorHigh Gearing Ratio
High REIT Manager's ShareholdingLow Fixed Rate Debt %
High Directors of REIT Manager's Shareholding Low Unsecured Debt %
Long WALELow Interest Coverage Ratio
Well Spread Lease ExpiryHigh Top Geographical Contribution
Well Spread Debt MaturityHigh Top Property & Top 5 Properties Contributions
Low Top Tenant & Top 5 Tenants ContributionsLow Property Yield
 Non-Competitive Management Fees
 Low Distribution on Capital
 DPU Downtrend
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend

Despite COVID-19 restrictions, Suntec REIT performance and fundamentals have improved as compared to the previous quarter. However, the gearing ratio is still on the high side, the current gearing ratio of 44.3% is the 2nd highest among Singapore REITs. For upcoming quarters, the full quarter contribution from the Minster Building coupled with vaccinated travel lanes (VTL) of Singapore and planned border opening of Australia should improve its performance. 


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee 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 and 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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