Sabana REIT - Awaiting Earnings Growth Catalysts
- The completion of NTP+ is projected to add ~S$3.5m to Sabana REIT (SGX:M1GU)’s revenue and boost occupancies and rental reversions at the REIT’s “Crown Jewel”. Hence, we are forecasting a DPU CAGR of ~7% for Sabana REIT over the next two years.
- Having successfully completed five AEIs in the past year that led to portfolio revaluation gains and earnings growth, Sabana REIT will continue to focus its efforts on more portfolio rejuvenation initiatives. With AEIs at 1 Tuas Avenue 4 currently on the cards, we believe that more clarity on such plans and firm pre-commitments for the property will drive earnings upside.
- As Sabana REIT continues to focus on rejuvenating its portfolio, it is ready to embark on acquisitions in the near to medium term. Although Sabana REIT’s capital management fundamentals are conducive for acquisitions, stiff competition for quality industrial and logistics assets could pose a hurdle. As such, we hope to see more clarity on Sabana REIT’s ability to acquire accretively in the coming years to achieve their targeted S$1.0bn AUM.
- Despite maintaining our target price of S$0.48, we have downgraded our recommendation on Sabana REIT to HOLD based on valuations. Over the past year, Sabana REIT's share price has increased by more than 20%, as its portfolio earnings recovered from the height of the COVID-19 outbreak and optimism for its portfolio rejuvenation took shape. With a full-year income contribution from New Tech Park and NTP+ in FY22, we project a forward target yield of ~7.0% for Sabana REIT. At such levels, we believe that Sabana REIT is fairly priced.
Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.
Dale LAI DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2022-01-21 2022-01-21
Previous report by DBS Research:
2021-07-23 Sabana Shari'ah Compliant REIT - Raising Target Price As NTP+ Shines
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