- We upgrade Suntec REIT to BUY from HOLD with a higher target price of S$1.40. With interest rates for its key markets (SG, AU, GBP) on the downtrend, we believe concerns on capital values and interest rates erosion will gradually turn into tailwinds. Stock is attractive at 0.6x P/B with forward yields of ~5.3%.
- - Read this at SGinvestors.io -
Why are we turning positive on Suntec REIT?
Improvement in earnings underpinned by Singapore portfolio.
- Suntec REIT’s underlying earnings in 1H25 were strong, driven by continued healthy positive rental reversions. In Singapore, office rents saw a reversion of +10%, while retail rents were even more impressive at +17.2%.
- - Read this at SGinvestors.io -
Lower financing cost seen and to improve further.
- On the capital management front, a positive surprise was the improvement in Suntec REIT’s overall financing costs, which have decreased ~24bps to 3.82% since peaking at the start of the year. With interest rates expected to continue their decline, we anticipate further savings on borrowing costs.
- We conservatively factored this into our projections by lowering our borrowing cost assumptions by ~30bps by end-FY26 to ~3.5%.
Earnings uplift from FY26F with MIT structure reinstatement.
- Read more at SGinvestors.io.
