Suntec REIT upgraded to Add by CGS-CIMB after earnings show retail improved

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CGS-CIMB upgraded Suntec REIT to Add from Hold after its first-quarter results showed improved retail and convention performance.

Suntec REIT reported net property income for the first quarter rose 1.9 percent on-year to S$62.99 million, while its distribution per unit (DPU) was up 0.3 percent at 2.433 Singapore cents.

CGS CIMB said in a note on Wednesday that the DPU was in line with expectations at 24 percent of it full-year forecast. It noted that the office portfolio occupancy was high and relatively stable on-quarter at 99.1 percent.

It added that retail earnings were stabilizing, with Suntec City Mall’s committed occupancy at 98.6 percent, with shopper traffic and tenant sales up 12.7 percent and 5.2 percent on-year respectively.

Inorganic growth via acquisitions could offer another earnings driver, the note said, pointing to the purchase of another effective 25 percent stake in Southgate Complex in Melbourne, Australia, which is expected to be completed in May, offering a boost to earnings in the second half of the year.

CGS-CIMB lowered its target price to S$2.12 from S$2.17 after tweaking DPU estimates.

“At the current share price, the stock is showing some value,” the note said, pointing a stabilizing retail leasing earnings outlook. But it added: “Given the current volatile markets, we believe a good entry point would be closer to its long-term average level i.e. closer to the S$1.80 mark.”

The stock was up 1.05 percent at S$1.92 at 10:45 A.M. SGT on Thursday.