Paragon REIT - UOB Kay Hian 2024-12-04: Singapore Assets Are Resilient But Valuation Looks Fair

• While Paragon REIT (SGX:SK6U) is a takeover target, 2025 distribution yield of 5.2% looks fair.
• Paragon continues to generate positive rental reversion as tenant sales for luxury goods, while in the negative territory, outperform steeper declines in other Asian markets. Paragon REIT intends to elevate the positioning of Paragon towards top-tier luxury brands and set up more duplex stores.
• - Read this at SGinvestors.io -

Chinese have pulled back from ostentatious consumption.

• Tenant sales at Paragon dropped 6.7% y-o-y in 1H24 and 6.6% y-o-y in 3Q24. Aspirational Chinese consumers have pulled back from purchasing luxury goods. Local governments were admonished to embrace austerity. The ongoing common prosperity and anti-corruption campaigns have also dissuaded ostentatious displays of wealth.
• - Read this at SGinvestors.io -

Paragon maintains positive reversions despite lacklustre tenant sales.

• Paragon, being the premier upscale mall strategically located in the prime Orchard Road precinct, benefitted from the recovery in visitor arrivals, which increased 14% y-o-y and accounted for 88% of pre-pandemic levels in 3Q24. Tourism receipts on shopping increased 10.4% y-o-y in 2Q24. Thus, luxury brands continue to expand in Singapore due to the more resilient domestic retail scene relative to overseas markets.
• Medical suites at Paragon also benefitted from the ongoing upgrading at nearby Mount Elizabeth Hospital.

Repositioning towards top-tier luxury brands.

• Read more at SGinvestors.io.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2024-12-04 SGinvestors.io

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