SPH REIT target price raised by Daiwa on Paragon mall recovery prospects

Singapore 50 dollar bill

Daiwa raised its target price for SPH REIT to S$1.01 from S$0.92 on a stronger recovery outlook for the Paragon mall property from fiscal 2023. The investment bank kept an Outperform call on the REIT.

SPH REIT reported Monday its fiscal third quarter gross revenue increased 22.2 percent on-year to S$209.6 million as rent relief for tenants in Singapore and Australia declined and on additional revenue from Westfield Marion compared with the year-ago period.

The REIT’s management said Singapore’s Phase 2 Heightened Alert period from 16 May to 13 June dampened lease momentum at Paragon, according to the Daiwa report Tuesday.

Daiwa forecast Paragon would post rental reversion of negative 5 percent over fiscal 2021-22, while occupancy would remain high at 97-99 percent, but it added it expected a faster recovery from fiscal 2023, raising its rental reversion forecast to 7 percent from 3 percent as the pandemic situation eases.

“Paragon is well-positioned to benefit from a recovery of Orchard Road’s malls due to the rapid vaccination progress in Singapore. We believe this will boost spending as restrictions are gradually lifted and possible travel lanes are implemented,” Daiwa said.

“We expect rental relief provided to SPH REIT’s portfolio to taper off from FY22 as the pandemic situation in Singapore and Australia eases,” Daiwa added.

SPH REIT units ended Wednesday up 1.07 percent at S$0.94.