SINGAPORE (Jan 19): DBS is maintaining its “hold” call on Soilbuild Business Space REIT (SBREIT) with target price of 62 cents, implying 6% total return.
DBS believes that ongoing uncertainties lingering over the possible vacancy risk arising from tenant defaults over various assets and the lack of imminent catalysts will cap share price performance.
To recap, SBREIT’s 4Q17 results remained weak with DPUs and NAV under pressure.
See: Soilbuild REIT reports 11.9% lower 4Q DPU of 1.383 cents
The research house says it does not see a recovery in the immediate term, mainly on the back of difficulty in backfilling the space at 72 Loyang Way and the possible vacancy from defaulting tenants and lower income due to further tenant defaults at NK Ingredients and KTL offshore buildings.
The manager has proposed the sale of the KTL offshore property for $55 million to the sponsor, funds of which will be used to repay debt.
In terms of inorganic growth, the manager has announced his intention to look at Australia to expand its investment scope.
Australia, in its view, presents many acquisition opportunities but given SBREIT’s lack of scale and operational experience, it could prove to be tough to scale up meaningfully.
Units in Soilbuild REIT are trading at 70 cents or 7% distribution yield for FY18.
