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Highlights From Suntec Real Estate Investment Trust’s Latest Second Quarter Results

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Suntec Real Estate Investment Trust (SGX: T82U) had released its second quarter results yesterday evening.

Listed on 9 December 2004, Suntec REIT is known for its flagship property Suntec City, Singapore’s largest integrated commercial development. In addition, the REIT, which is Singapore’s second largest REIT behind CapitaMall Trust (SGX: C38U), has interests in Park Mall, One Raffles QuayMarina Bay Financial Centre, and Suntec Singapore Convention & Exhibition Centre. Lastly, Suntec REIT also fully owns a commercial building located at North Sydney, Australia which is currently under development.

Some basic numbers

Suntec REIT saw its gross revenue soar 45.1% year-on-year to S$68.1 million for the second quarter of 2014. Meanwhile, net property income also surged by a remarkable 64.9% to S$46.1 million from S$28.0 million a year ago. The growth was mainly attributable to the opening of Suntec Singapore Convention & Exhibition Centre following the completion of its asset enhancement initiatives in the second quarter of 2013.

Investors in the REIT would also be happy to know that its amount available for distributions has increased by 11.3% from S$50.9 million a year ago to S$56.6 million. However, growth in its distribution per unit (DPU) was rather muted at 0.8% due to the larger amount of units outstanding; the REIT ended the second quarter with DPU of 2.266 Singapore cents.

Financial position and operating performance

As of 30 June 2014, Suntec REIT’s gearing ratio stood at 35.3% and its average financing cost was at 3.05%. The weighted average term to expiry of the REIT’s various loans is 4.13 years. It’s also good to note that the REIT has no refinancing requirements for 2014 and 2015; this would give the REIT ample maneuvering space when it comes to refinancing its borrowings.

Meanwhile, Suntec REIT possess a “Baa2” credit rating (9 ranks below the highest Aaa rating); such a credit rating indicates that the issuer of the debt (in this case, Suntec REIT) has an acceptable ability to repay short-term obligations according to the ratings agency.

Moving to Suntec REIT’s operations, strong occupancy rates of 99.7% and 97.6% have been achieved for the REIT’s office and retail portfolio respectively as of June 2014. Furthermore, the occupancy rates have not dipped below 95% over the past 4.5 years since December 2009. The proportion of the REIT’s office and retail leases that are expiring in 2014 are also low at 5.6% and 6.3% respectively. This signifies stable rental profits going forward.

Outlook for Suntec REIT

Yeo See Kiat, Chief Executive Officer of the Manager of Suntec REIT, commented on some of the REIT’s future plans:

“On the marketing front, we are pleased to report that we have achieved 97.6% committed occupancy for Phases 1 and 2 of the remaking of Suntec City and Phase 2 opened on 1 June 2014. Our current priorities are to focus on the execution and completion of the remaking of Suntec City, the marketing of Phase 3 as well as proactive lease management to strengthen the lease commitments and maintain the high occupancy level of both our office and retail portfolios.”

Mr. Yeo added some further comments regarding this quarter’s numbers:

“During the second quarter of 2014, despite the closure of a substantial part of Suntec City mall for the asset enhancement works, the amount available for distribution from operations of S$51.6 million was 19.8% higher year-on-year. This was mainly attributable to the completion of Suntec City Phase 1 as compared to 2Q FY13. As such, the capital distribution for this quarter was S$5.0 million which was 35.9% lower year-on-year. The total distribution income of S$56.6 million and DPU of 2.266 cents was 11.3% and 0.8% higher year-on-year respectively.”

The REIT’s units last changed hands at S$1.855 on Tuesday, representing an annualised distribution yield of 4.9%. Based on REIT’s book value per unit of S$2.069, this translates to a historical P/B ratio of 0.89.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.