Suntec REIT: Resilient Performance Amid Headwinds

Suntec REIT reported a distributable income of S\$180.9 million for FY2024, reflecting a 1.6% decline compared to FY2023. The Distribution Per Unit (DPU) also saw a notable decline, dropping by 13.2% year-on-year due to the absence of capital distribution in FY2024. Despite this, the operational performance of its Singapore Office and Retail portfolios, as well as its Sydney properties, showed improvement. However, Melbourne properties remained stable while vacancies in assets like the 55 Currie Street, Adelaide, and The Minster Building, London, impacted overall contributions.

CEO Mr. Chong Kee Hiong highlighted strong rent reversions in the Singapore Office and Retail portfolios and improved income from Suntec Convention due to high-yielding events. On the divestment front, Suntec REIT sold strata units at Suntec City Office Towers for S\$58.3 million, achieving a price 24% above book value to pare down debts. The REIT also secured its highest GRESB 5-Star rating for the fifth consecutive year, reflecting its commitment to sustainability.

Looking ahead, the Singapore office portfolio is expected to maintain high occupancy above 95% with positive rent reversions in the range of 10-15%. However, challenges in Australia, such as high vacancy rates in Adelaide and Melbourne, along with elevated incentives, are likely to persist. The United Kingdom portfolio, particularly The Minster Building, is expected to see improved occupancy by 2025.

With a market capitalization of S\$3.5 billion, Suntec REIT trades at 0.6x P/B with a dividend yield of 5.1%. Investors are recommended to “HOLD” as the takeover offer of \$1.19 is still significantly below its NAV of S\$2.05.

OUE REIT: Stability Amid Strategic Divestments

OUE REIT reported an increase in revenue to S\$148.8 million for 2H2024, up 1.7% year-on-year, driven by stable performance in its Singapore office portfolio and asset enhancements at Crowne Plaza Changi Airport. However, net property income (NPI) decreased by 2.3% year-on-year due to upward revisions in property tax for Hilton Singapore Orchard and Crowne Plaza Changi Airport. Adjusting for these revisions, NPI would have seen a slight increase of 0.3%.

The amount available for distribution grew by 3.7% year-on-year to S\$59.9 million in 2H2024, translating to an 8.7% increase in DPU to 1.13 Singapore cents. For the full year FY2024, the DPU stood at 2.06 cents, yielding 7.2% based on the closing price of S\$0.285. Following the sale of Lippo Plaza Shanghai for RMB1,917.0 million (approximately S\$357.4 million), OUE REIT’s assets are now fully located in Singapore, enhancing its financial flexibility.

Looking ahead, challenges such as global economic uncertainties, high fit-out costs, and elevated interest rates are expected to weigh on occupier sentiment. However, below-average office supply in Singapore’s Core CBD and anticipated rate cuts could support rent growth. OUE REIT is trading at a 0.52x P/B with a dividend yield of 6.9%. Given its strategic focus on quality Singapore assets, the recommendation is to “Accumulate” with a target price of S\$0.36, representing a 20% upside.

Other Key Highlights

Frasers Logistics Trust

With a strong forward dividend yield of 7.61%, Frasers Logistics Trust remains an attractive option for income-focused investors. The trust continues to demonstrate steady growth in its logistics portfolio across Asia-Pacific.

Mapletree Pan Asia Commercial Trust

Mapletree Pan Asia Commercial Trust offers a forward dividend yield of 6.81%. Its diversified portfolio remains resilient, supported by strong leasing demand and proactive asset management.

Mapletree Logistics Trust

Delivering a forward dividend yield of 6.43%, Mapletree Logistics Trust is well-positioned to capitalize on the growing demand for logistics space across the region.

Jardine Cycle & Carriage

Jardine Cycle & Carriage boasts one of the lowest trailing EV/EBITDA ratios among FSSTI stocks at 5.72x. The company continues to deliver robust financial performance, making it a compelling value proposition.

Ongoing Share Buybacks

Several companies have actively engaged in share buybacks, including Singtel, Venture Corp, and OCBC. These buybacks not only reflect confidence in their own valuations but also aim to enhance shareholder returns.

Divestment and Strategic Initiatives

The report also highlights divestments and strategic initiatives by several companies:

• OUE REIT’s divestment of Lippo Plaza Shanghai enhances its portfolio quality by focusing solely on Singapore assets.
• Suntec REIT’s sale of strata units at Suntec City Office Towers demonstrates effective portfolio management, achieving accretive transactions.