Wednesday, 23 July 2014

Suntec REIT continue to Shine with 2Q Latest Results

Suntec announced 2Q results yesterday. I am more than happy with the results announced, particularly on the stable DPU despite the private placement in Mar 14 diluting shareholder base. Both Gross revenue and NPI continues to grow, benefiting from the completion of ongoing Asset Enhancement Initiatives (AEI). Suntec Reit is one of my biggest holdings, and seeing the positive results further enhance my confidence in the company. I continue to like Suntec potential growth going into FY15 and 16 with the due completion of final phases AEI on Suntec Mall and the scheduled completion of Sydney 177 Pacific Highway office development in 2016. There are also rumours that it may acquire Straits Trading Building and raise its stake in Suntec convention centre going forward. Estimated 4.9% dividend yield seems low due to the potentials in growing, but price is also at 10% discount to the book value. 

Let the “Fountain of Wealth” continues to flourish!

source: Suntec homepage
  • Distributable income to Unitholders 2QFY14 grew 11.3% to S$56.6 million.
  • DPU of 2.266 cts vs 2.249 cts yoy (0.8% increase).
  • Estimated FY14 DPU of 9.0 cts (annualized from 1H DPU of 4.495c)
  • Dividend yield 4.9% (last close price S$1.85) and 5.5% (at my cost)
  • P/E ~12.2 and P/B~0.89
Suntec benefits from completion of AEI
  • Gross revenue for 1Q14 increase 45.1% to S$68.1 million; 1H14 increase 38.8% to 134.1 million yoy
  • NPI for 1Q14 increase 64.9% to 46.1 million; 1H14 increase 53.3% to 89.9 million yoy. 
  • Increase in revenue and NPI due mainly to the opening of Suntec Singapore Convention & Exhibition Centre following the completion of its AEI initiatives in the second quarter of 2013.
  • Although gross revenue increase significantly, DPU rise was slight because of an enlarged unit capital following its S$350mil private placement in March this year to raise funds for debt repayment.
Strong Occupancy 
  • The occupancy rates for office portfolio stands at 99.4%; retail at 97.6%. 
  • For JV ORQ and MBFC properties, occupancy is 100%.
  • Balance of office and retail leases expiring in FY2014 stood at 5.6% and 6.3% respectively.
  • Leverage ratio as of end June is 35.3%.
  • All-in financing cost is 2.62% excluding one time write-off of unamortized transaction cost. Including write off, ave financing stands at 3.05%.
  • Weighted average term to expiry extended to 4.13 years. 
  • No re-financing in until FY16. 
  • Interest coverage ratio is at 4.3 times. 
  • Credit rating of  “Baa2″  indicates Suntec Reit has an acceptable ability to repay short-term obligations according to the ratings agency.
  • 2014 office portfolio performance continue to be positive.
  • DPU continue to be stable.
  • Suntec City Mall Phase 2 revenue recognition in coming quarters.
  • Phase 3 and 4 AEI upcoming and 2016 completion of Sydney 177 office building signals more growth.  
Results here

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  1. How do you get a 10% discount to the book value? Just want to learn from you...

  2. Hi Simoen,

    This post was written close to 2 yrs ago. The discount is based entirely on pricing and net asset value (aka book value) at that time.

    At Suntec current pricing, the price to book value is 0.78 or 22% discount.

    Net asset value is total assets subtract total liabilities divided by the total number of shares.