UOB Kay Hian analyst Jonathan Koh has kept his “buy” rating on Suntec REIT along with an increased target price of $1.88 from $1.74.
Suntec REIT owns a portfolio of assets which, besides Suntec City also includes stakes in parts of One Raffles Quay, Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall.
According to Koh, Suntec City, which has both retail and office space, has received more queries from multinational companies inclined to relocate their regional headquarters from Hong Kong to Singapore.
Recent additions include Samsonite and New Balance. Koh expects Suntec City’s office space to enjoy an occupancy rate of 98% for 1QFY2022 ended March 2022, up 0.8 percentage points over 4QFY2021.
Over at Marina Bay Financial Centre, key tenant Standard Chartered is reportedly giving up 200,000 sq ft of office space. In turn, an unnamed tech company is taking up 100,000 sq ft and other new tenants are likely to come in as well. Koh says the new tenants will likely pay a higher rate than what Stanchart paid.
Elsewhere, with the rapid opening up of Singapore to vaccinated visitors, the retail business is seen to enjoy an uplift. “We expect the return of tourists to lead to further recovery of shopper traffic and tenant sales in 2HFY2022,” says Koh, adding that as such Suntec REIT is unlikely to again give a rental waiver to its retail tenants worth some $6 million in FY2021.
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In addition, Suntec REIT is likely to share with unitholders divestment gains from the sale of its stake in 9 Penang Road.
Koh estimates this payout to be $20 million each for FY2022 and FY2023. He sees Suntec REIT paying a yield of 5.5% for FY2022, while trading at a discount of 15% to its net asset value of $2.11 per unit.
