SINGAPORE (Apr 24): If 2019 had not been kind to Suntec Real Estate Investment Trust (Suntec REIT), the beginning of 2020 doesn’t seem to looking up for the REIT either.
Suntec REIT posted a 27.7% drop in its distribution per unit (DPU) to 1.760 cents for the 1QFY2020 on Wednesday.
See: Suntec REIT posts 27.7% drop in 1Q DPU to 1.76 cents
Despite the gloomy outlook, CGS-CIMB reiterates its “buy” call at a lower target price of $1.75, slashed from its previous $2.13, despite the REIT performing “below expectations at 18.2% of its FY2020 forecast”.
“While we think Suntec REIT’s share price has factored in the downside risks to earnings and valuations are inexpensive, we see few catalysts for near-term share price outperformance,” say analysts Lock Mun Yee, and Eng Kar Mei, who went on to add that the upside risk to the REIT is a “faster-than-expected recovery” from the impact of Covid-19, but warned that the RIET could face a “slower-than-expected macro outlook”.
According to CGS-CIMB, while the REIT’s retail portfolio is facing “challenging times”, there is still hope in its office portfolio. Suntec REIT leased 133.9k sq ft of office space in 1Q2020, of which 42% are new leases. Suntec Office achieved a rental reversion of 13.1% while committed occupancy slipped to 95.3%. Its Australia office portfolio was reported to be stable, with a committed take-up at 97.7%.
The brokerage has forecasted Suntec REIT’s dividend yield to be at 5.67% end December 2020, and distributable profit at $210.2 million.
As at 3.31pm, units in Suntec REIT are trading 3 cents lower, or down 2.4% at $1.23.
See also: As REITs pare dividends to conserve cash, which ones should investors buy?
