- Lendlease REIT (SGX:JYEU)'s FY23 revenue and NPI doubled to S$204.9m and S$153.9m, respectively, and were below our expectations at 94% and 91%. Healthy retail rental reversion of 4.8% and increasing contribution from Jem were the main driving factors. We anticipate these trends to continue in FY24e, with additional upside potential from 313@somerset.
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- We reiterate our BUY recommendation on Lendlease REIT with a decrease in FY24e-25e DPU forecasts to S$0.0438 - S$0.0463 on the back of rising interest rates. Our DDM-based target price for Lendlease REIT is adjusted down to S$0.86.
The Positives
Strong rental reversion continues in FY24e
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- The Sky Complex in Milan (tied to the CPI index) experienced a 5.9% rental escalation. Tenant sales at the portfolio level increased 2.5 times, surpassing pre-COVID levels by over 16% in Jun 2023 while Footfalls have normalized to 100%.
- We expect the rental trend of Jem to stabilize in 2H23, while 313@somerset's rental is projected to gradually increase as international visitors return.
Portfolio occupancy stays at 99.9% as of Jun 2023 and tenant retention at 82.4%.
- Read more at SGinvestors.io.
