Analysts from DBS Group Research and PhillipCapital are positive on Sabana Shari'ah Compliant Industrial REIT’s prospects ahead of the opening of NTP+, slated for 2Q2021.
The lifestyle mall, which is located at New Tech Park (NTP), comprises around 43,000 square feet of gross floor area (GFA) and is part of ongoing asset enhancement initiatives (AEI) for NTP.
The DBS Group Research team notes that NTP+ has reached 96.7% commitment, up from around 80% reported in early March. Tenants secured include SF Group and Wine Connection, with rental rates reportedly between $8 - $10 per square foot (psf) monthly.
DBS believes the REIT's net property income from NTP+ could potentially increase from $2.6 million to $4.5 million for FY2022 ending December on higher rent.
“Monthly rents for retail units are being advertised at $16 - $20 psf, which may hint at rents falling between $10 - $16 psf,” the team explains.
DBS currently has a ‘buy’ rating for Sabana REIT with a target price of 45 cents.
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Meanwhile, in an unrated report dated April 19, PhillipCapital analyst Tan Jie Hui says the value of NTP, which represents 40% of its portfolio value, has yet to be unlocked.
He believes the completion of AEI at NTP will enhance NTP’s attractiveness as an employment-cum-lifestyle hub for the surrounding catchment in Lorong Chuan. He notes that NTP still has GFA of 200,000 sf that is under-utilised. The property currently serves over 30 corporate tenants.
From an overall perspective of the portfolio, Tan notes that Sabana REIT has a high retention rate for existing leases at 73.6%, while a total of 68 new and renewed leases were obtained in FY2020.
Pointing to the REIT’s focus on expansionary trade sectors such as electronics, telecommunications, data warehousing and healthcare, Tan believes onboarding tenants in these sectors will give Sabana REIT's portfolio greater resilience.
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"Sabana REIT onboarded a US electronics company as a new anchor tenant at 23 Serangoon North Avenue 5 (23SNA5) in FY2020. It also converted 3A Joo Koon Circle into a healthcare cluster," he notes.
Tan also notes the REIT’s AEI projects helped minimise the impact of Covid-19 on Sabana REIT’s portfolio valuation, which dipped only 5% in FY2020.
“Rejuvenation work at 23SNA5 was completed in March. This lifted its valuation by 17.4% h-o-h, from $31 million in 2QFY2020 to $36.4 million in 4QFY2020. Ongoing AEI to refresh NTP also improved the property’s valuation by 3%,” he says.
As at 1.15pm, shares in Sabana REIT are trading flat at 42.5 cents.
