Daiwa raised its target price on Suntec REIT slightly to S$1.66 from S$1.64, despite revenue and net property income coming in below its forecasts, largely due to the 10-year Singapore government bond yield’s decline to 1.4 percent.
The REIT reported Thursday its first half net property income rose 23.9 percent on-year to S$112.62 million, while gross revenue increased 11.6 percent on-year to S$166.76 million.
Daiwa said revenue and net property income missed its forecasts by 9 percent and 14 percent, respectively, on weaker-than-expected contributions from Suntec City Mall, Suntec Singapore’s convention business and Australian properties 21 Harris Street and 477 Collins Street.
But the distribution per unit (DPU) of 4.154 Singapore cents, beat Daiwa’s forecast by 3 percent due to rent guarantees for the Australia properties and higher dividends from associates and joint venture properties, the investment bank said in a note Thursday.
Daiwa raised its DPU forecast for 2021 by 1.4 percent, but lowered its estimates for 2022 and 2023 by 1.9 percent and 3.8 percent respectively.
The gradual recovery in the office and retail sectors — hard-hit by Covid-19 pandemic lockdowns — is unlikely to be derailed by uncertainty in the second half, Daiwa said.
“We reaffirm Outperform on its undemanding valuation vs. peers and as a play on the possible retail/office recovery in 4Q21-1H22,” Daiwa said. “Suntec is also trading at a 28 percent discount to its end-June 2021 book value of S$2.062/unit.”
Units of Suntec REIT were trading flat at S$1.49 at 12:47 p.m. SGT.