What Investors Need to Know about Suntec Real Estate Investment Trust’s Latest Quarterly Results

Suntec Real Estate Investment Trust (SGX: T82U), Singapore’s 2nd largest REIT after CapitaMall Trust (SGX: C38U), released its third quarter results on Tuesday evening.

Suntec REIT owns Park Mall and Suntec City, and has partial interests in other commercial/retail properties like One Raffles Quay, Marina Bay Financial Towers 1 and 2, Marina Bay link Mall, and Suntec Singapore Convention & Exhibition Centre.

The REIT, which is managed by ARA Asset Management Limited (SGX: D1R), also has a full interest in a commercial building that is under development located in North Sydney, Australia.

For the quarter ended 30 September 2014, Suntec REIT’s gross revenue came in at S$71.5 million, an 8.5% increase as compared to the previous year. Meanwhile, net property income was at S$48.8 million, a rise of 21.1% year-on-year.  The good showing in gross revenue and net property income was due mainly to the completion of Phase 2 of the asset enhancement works at Suntec City Mall. Phase 1 of the enhancement was completed in June last year while Phase 2 was completed this June.

The growth in Suntec REIT’s top-line trickled down to the bottom-line as its distribution per unit (DPU) for the latest quarter increased by 1.7% to 2.328 Singapore cents. Last year, the DPU was at 2.289 cents.

As of 30 September 2014, the REIT’s gearing ratio was at 34.4%. This compares with the leverage ratio of 34.1% seen at CapitaMall Trust, another REIT with a heavy focus on retail malls. Investors would be happy to know that the overall committed occupancy rate for Suntec REIT is healthy; its retail portfolio and office portfolio is 98.4% and 100% occupied, respectively. This is an improvement from the retail and office occupancy of 97.6% and 99.7%, respectively, seen at the end of June 2014.

The last phase, Phase 3, of the makeover of Suntec City is slated to be completed by the end of the year. It has a committed occupancy of 60% now and the REIT’s manager is working actively to lease the remaining space. Mr. Yeo See Kiat, Chief Executive Officer of the Manager, commented on the enhancement works:

“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 levels of both our office and retail portfolios.”

Suntec REIT closed at S$1.80 on Tuesday, giving the trust an annualised distribution yield of about 5%. Based on the REIT’s latest book value per unit of S$2.056, it has a historical price-to-book ratio of 0.88.

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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 Sudhan P owns shares in ARA Asset Management Limited.