RHB Favours Suntec REIT As Office Occupancy Hovers At 98%
SINGAPORE – In the office and retail segment, Suntec REIT is the number one pick for RHB thanks to the trust’s appealing valuations as well as the earnings recovery of its recently acquired and completed properties, reported The Business on Wednesday morning (16 December, SGT).
The announcement of RHB’s top REIT choice comes as the occupancy level of office properties in Singapore remained high at 98.1 percent so far this year. In fact, around 348,500 sq ft of leases were inked, of which 30 percent accounted for new leases, said the research house.
As for the retail sector, while the situation is getting better, RHB thinks that occupancy is still under pressure, albeit its occupancy level is expected to remain at circa 90 percent. As for its rents, the rates are being dragged down due to negative rent reversions of 5 to 15 percent for upcoming leases. Moreover, the research house believes that Suntec REIT’s convention wing would only start recovering by 2022.
On a research note released on Wednesday, RHB kept its “buy” call on the trust with the same target price of S$1.79 per Suntec REIT unit, which is changing hands at 0.7 times price-to-book value (P/BV).
As of 10:41 am on Wednesday, each Suntec REIT unit was trading at 0.7 percent or S$0.01 lower at S$1.51.
RHB Analyst Vijay Natarajan foresee that its distribution per unit (DPU) would recover on an annual basis by 2021 thanks to Suntec REIT’s full-year contributions from recently finished projects. Other reasons he cited include positive rent reversions signed and the absence of rental rebates.
“We estimate Suntec REIT will resume its capital top-up with the stabilisation of COVID-19 and have assumed S$10 million in capital top-ups for 2021,” he added.
