CGS-CIMB Research analysts Eing Kar Mei and Lock Mun Yee are upbeat on Lendlease Global Commercial REIT (LREIT) after its 2HFY2021 ended June results came in line with expectations.
See: Lendlease Global Commercial REIT posts 32.8% higher 2H21 DPU of 2.34 cents
The analysts highlight that LREIT’s stronger performance was mainly attributable to lower rental rebates provided to retail tenants at 313@Somerset, and a stronger euro against the Singapore dollar from the property at Sky Complex. Rental reversions have also improved q-o-q, albeit still in negative territory according to the manager.
Eing and Lock view that LREIT’s portfolio remains robots with a high occupancy of 99.8% in FY2021 with a long weighted average lease expiry of 8.8 years.
They also note that tenant sales and footfall improved 33.6% and 6.2% y-o-y to $81.5 million and 11.4 million respectively for the 2HFY2021. “We expect further relaxation of restrictions and higher vaccination rates to drive recovery across LREIT’s retail portfolio,” they say.
“LREIT is well-capitalised with a gearing ratio of 32% and interest coverage ratio of 8.9 times, in our view,” they add.
The analyts have updated their forecast to introduce FY2024 estimates. They have also lowered their cost of equity assumptions from 7.7% to 7.3%, reflecting a premium for LREIT’s potential inclusion into FTSE EPRA Nareit Index.
To that end, their target price for LREIT has increased to 95.6 cents, up from 89.1 cents previously.
“Against a backdrop of ongoing Covid-19 uncertainties, we expect LREIT to face rental pressures in FY2022 but we believe that annual rental escalations in c.60% of the mall’s NLA, the long lease structure of Sky Complex, and the 44,200 sq ft Grange Road redevelopment should cushion negative rental reversions for renewed leases,” they say.
Units in LREIT closed flat at 88.5 cents on August 13.
