20131008-Maybank_KERPL-Suntec_REIT_Patience_Is_Bitter,_But_Its_Fruit_Is_Sweet._12页_819kb

Suntec REIT Summary Report

Core Information

• Share Price: SGD1.66
• Target Price: SGD1.90 (Unchanged)
• Description: Suntec Real Estate Investment Trust is a real estate investment trust that focuses on income-producing real estate, primarily for retail and office purposes.
• Shares Issued: 2,260.9 million
• Market Cap: USD 2,995.7 million
• 3-Month Avg Daily Turnover: USD 9.1 million
• ST Index: 3,137.53
• Free Float: 89.8%
• Major Shareholder: Suntec City Development (6.23%)

Key Indicators

• ROE (Annualised): 9%
• Debt to Deposit Assets: 38.3%
• NAV per Share (SGD): 2.07
• Interest Cover (x): 4.1

DPU (Dividend per Unit) Projections

• 3Q13 DPU: 2.28 SG-cts (+1.5% QoQ; -2.8% YoY)
• FY13 DPU: 9.23 SG-cts
• DPU Growth (%): -2.7% YoY
• DPU Yield (%): 5.6%
• P/B (Price to Book Value): 0.80x

Performance Overview

• 52-Week High/Low: SGD2.00 / SGD1.47
• 1-Month Absolute (%): 10.0
• 3-Month Absolute (%): 3.4
• 6-Month Absolute (%): -10.5
• 1-Year Absolute (%): 8.2
• YTD Absolute (%): -1.2
• 1-Month Relative (%): 6.8
• 3-Month Relative (%): 4.5
• 6-Month Relative (%): -5.9
• 1-Year Relative (%): 7.1
• YTD Relative (%): -0.3

Key Trends and Analysis

• Retail Sales:

  • The Singapore Retail Sales Index (excluding motor vehicles) rose by 2.5% YoY in June and July.
  • The Food and Beverage Services Index also showed growth, while recreational goods and telecommunications apparatus/computers saw declines.
  • The F1 race in August-September is expected to boost retail sales.
  • Turnover rents for Retail REITs constitute only 2-10% of overall FY11-FY12 gross revenue, offering some resilience in case of a sales slump.

• DPU Top-Up:

  • Suntec received ~SGD147m from the sale of Chijmes in 1Q12.
  • It has topped-up ~SGD2.7m in 1Q13 and ~SGD7.8m in 2Q13.
  • A further top-up in 3Q13 is possible.

• AEI Progress:

  • Phase 1 renovation works have been largely completed, with pre-commitments reaching 99.6% in 2Q13.
  • Phase 2 pre-commitments reached 70.1% in 2Q13, expected to hit at least 85% by 3Q13.
  • AEI is expected to be completed by end-2014.

Financial Projections (FYE Dec)

Value Enhancements

• Projected ROI: 10.1%
• Capital Value Increase: 84% over Capex
• Average Rent (before AEI): SGD10.10 psf pm
• Average Rent (after AEI): SGD12.59 psf pm
• Incremental NPI per annum: SGD23.2m
• Capital Expenditure (Capex): SGD230m
• Capital Value (after AEI): SGD422m
• Increase in Capital Value: SGD192m

Phasing of Works

Balance Sheet Highlights

• Total Assets (FYE Dec): SGD7,516.7m (2011A) to SGD8,097.6m (2015F)
• Total Liabilities (FYE Dec): SGD2,970.1m (2011A) to SGD3,220.8m (2015F)
• Unitholders' Funds: SGD4,433.8m (2011A) to SGD4,764.0m (2015F)
• Gearing (Debt-to-Deposited Assets): 38.0% (2013F) to 37.8% (2015F)
• Interest Cover Ratio: 3.8x (2011A) to 4.2x (2015F)
• Cash & Equivalents: SGD104.4m (2013F)
• Current Liabilities: SGD305.6m (2013F)

Cash Flow Highlights

• Operating Cash Flows (FYE Dec): SGD216.7m (2011A) to SGD233.3m (2015F)
• Free Cash Flow (FYE Dec): SGD213.2m (2011A) to SGD200.0m (2015F)
• Net Borrowing Proceeds: SGD112.5m (2013F)
• Net Change in Cash: SGD51.9m (2011A) to SGD7.3m (2015F)

Key Ratios

• Growth (%) YoY:
  • Sales: 8.3%
  • NPI: 0.2%
  • Net Income: 64.5%
  • Distributable Income: 20.9%
  • DPU: 0.7%
• Profitability (%):
  • NPI Margin: 71.5%
  • Net Income Margin: 234.8%
  • ROA: 8.4%
  • ROE: 14.3%
• Stability:
  • Gross Debt/Asset (%): 38.0%
  • Total Debt/Investment Prop (%): 39.7%
  • Interest Coverage (X): 3.8x
  • Interest & ST Debt Coverage (X): 0.8x
  • Cash Flow Interest Coverage (X): 4.2x

Investment Thesis

• Reiterate BUY: The investment thesis remains intact.
• DPU CAGR Growth (2012-2015): 4%
• Forward-Yield Spreads: 3.2%
• P/B (Price to Book Value): 0.80x
• Target Price (TP): SGD1.90 (unchanged)
• Price Upside: 14.5% (based on FY12A fair value)

Summary

• DPU Growth: Expected to increase modestly, with FY13 DPU at 9.23 SG-cts.
• AEI Impact: Expected to boost rental income and capital value significantly.
• Retail Sales: Show resilience, particularly in Food & Beverage and Department Stores.
• Financial Health: Maintains a stable gearing ratio and strong interest coverage.
• Valuation: Trading at a discount to fair value, with potential upside to target price.

Research Contact

• ONG Kian Lin

  • Email: ongkianlin@maybank-ke.com.sg
  • Phone: (65) 6432 1470

• WONG Chew Hann, CA

  • Regional Head, Institutional Research
  • Phone: (603) 2297 8686
  • Email: wchewh@maybank-ib.com

• ONG Seng Yeow

  • Regional Head, Retail Research
  • Phone: (65) 6432 1453
  • Email: ongsengyeow@maybank-ke.com.sg

• Howard WONG

  • Head of Research (HK/China)
  • Phone: (852) 2268 0648
  • Email: howardwong@kimeng.com.hk

• Jigar SHAH

  • Head of Research (India)
  • Phone: (91) 22 6623 2601
  • Email: jigar@maybank-ke.co.in

Disclaimer

• The information in this report is based on sources believed to be reliable but not independently verified.
• MKE disclaims any liability for any losses or damages arising from reliance on this report.
• Forward-looking statements are subject to risks and uncertainties.
• This report is for internal use only and may not be reproduced or distributed without prior consent.