Lendlease Global Commercial REIT - CGS-CIMB Research 2022-08-09: Recovery In Tenant Sales Outstripping Market

Lendlease Global Commercial REIT - Recovery In Tenant Sales Outstripping Market

  • Lendlease Global Commercial REIT (SGX:JYEU)'s FY22 (1 Jul 2021 to 30 Jun 2022) revenue and NPI grew by 29.3% abd 32.7% y-o-y to S$101.7m and S$75.5m respectively, boosted by the accretive acquisition of Jem and better operating performance at 313@somerset. Distributable income and distribution per unit (DPU) grew by 29.7% and 3.6% y-o-y respectively.
  • Tenant sales are ~15-18% above pre-COVID levels vs market's 10%. We understand that 313@somerset has achieved higher pre-COVID sales level compared to Jem, lifted by returning tourists.
  • 313@somerset and Jem have maintained high occupancy of 99.9% and 99.5%, respectively. FY22 reversions for 313@somerset and Jem have been positive. Portfolio valuation gained 2.5% y-o-y, attributable to uplift in market rents and improved market outlook while cap rates remain stable.
  • Meanwhile, annual escalation for Sky Complex are based on 75% of Italy’s CPI growth, which increased 6.8% y-o-y in May 22. Impact from rising electricity rates is mitigated by fixed-rate electricity contracts, which will run until end-FY23 (Jun 23) while the master leasee is responsible for Sky Complex’s utility expenses under the triple-net lease structure.
  • Post-acquisition of JEM, Lendlease REIT's cost of debt jumped q-o-q from 0.98% to 1.69% while interest rate hedge declined from 90% to 59%. EUR loans account for 28% of total borrowings. 100%/43% of EUR/S$ loans have been hedged. Going forward, management intends to increase interest rate hedge. Gearing remains slightly elevated at 40%.
  • FY23-24F DPU estimates for Lendlease REIT lowered by 3.9-4.1% as higher revenue assumptions were wiped out by higher borrowing assumptions. Reiterate ADD rating on Lendlease REIT with a lower DDM-based target price of S$1.02.
  • We expect organic growth on the back of positive reversions as well as the unlocking of ~10k sqft or 3.5% of untapped GFA at 313@somerset. Lendlease REIT’s pipeline assets include Parkway Parade and Paya Lebar Quarter, the latter could be acquired in tranches due to its strata title.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2022-08-09
SGX Stock Analyst Report ADD MAINTAIN ADD 1.02 DOWN 1.050

Read also CGS-CIMB's most recent report:
2022-11-08 Lendlease Global Commercial REIT - Good Leasing Traction To Kick Start The Year

Target prices by 2 other brokers at Lendlease REIT Target Prices.
Listing of broker reports at Lendlease REIT Analyst Report.

Relevant links:
Lendlease REIT Share Price History,
Lendlease REIT Announcements,
Lendlease REIT Dividends & Corp Actions,
Lendlease REIT News Articles


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