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Is There Still Value In Suntec Real Estate Investment Trust? | Value Invest Asia

Is There Still Value In Suntec Real Estate Investment Trust? | Value Invest Asia

Listed in 2004, Suntec Real Estate Investment Trust (Suntec REIT) derives income from a portfolio of prime properties, comprising of a retail mall, office buildings, and a world-class convention centre in Singapore and Australia. Presently, Suntec REIT’s market capitalisation stands at S$ 5.2 billion as of 1 April 2019.

In this article, I’ll revisit its fundamentals, bring an update on its recent financial results, and its valuation figures based on its current price of S$ 1.95 per unit. As such, here are 11 key things to know about Suntec REIT before you invest.

Source: Suntec REIT’s Annual Reports

Source: Suntec REIT’s Annual Reports

Source: Suntec REIT’s Annual Reports

Source: Suntec REIT’s Annual Reports

However, it made little sense, doesn’t it? If you read the above notes, I believe, you’ll find that most properties had recorded lower NPI for the past 3 years. So, how is it possible for Suntec REIT to continue to record higher distributable income and maintain a stable annual DPU when its NPI is falling during the period?

The answer lies in checking out the composition of its DPU. Often, DPU consists of two key components:

– DPU from Operations.
– DPU from Capital.

Apparently, Suntec REIT has declared a fall in DPU from operations as it was in line with NPI falls from its major properties, particularly over the past 3 years. Hence, to maintain its overall DPU figures, Suntec REIT has raised its capital distributions (DPU from capital) to offset its shortfall in DPU from operations.

Source: Suntec REIT’s Annual Reports

VIA’s Verdict

Suntec REIT has recorded a slight fall in NPI from most of its main properties. But, its stock price remained resilient as the overall DPU for Suntec REIT was kept at stable levels of 10.0 cents (boosted by an increase in DPU from capital). Looking forward, Suntec REIT has revealed that it will derive income from joint ventures where it holds 30% interest in 9 Penang Road and 50% interest in Olderfleet.

In terms of valuation, it is now trading at above average in P/B Ratio and below average in terms of dividend yields.

So, would you invest in Suntec REIT at S$ 1.95 per unit?

This content was originally published here.

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