Suntec Real Estate Investment Trust’s Latest Earnings: What Investors Should Know

On Thursday evening, Suntec Real Estate Investment Trust (SGX: T82U) released its first-quarter financial results for the fiscal year ending 31 December 2016. The reporting period was from 1 January 2016 to 31 March 2016.

Suntec REIT is one of the largest REITs in Singapore and currently has interests in retail malls and offices in Singapore and Australia. Its portfolio in Singapore includes Suntec City and Marina Bay Financial Centre, just to name a few. Suntec REIT is managed by ARA Asset Management Limited (SGX: D1R), which also manages other REITs such as Fortune Real Estate Investment Trust (SGX: F25U) and Cache Logistics Trust (SGX: K2LU).

With these as a background, lets see how the trust performed.

Financial highlights

The following are some of the important financial figures for the reporting quarter:

  1. Gross revenue was up by 5.2% year-on-year to S$78.3 million while net property income came in at S$54.0 million, an increase of 5.1%. Growth came mainly from the opening of the last phase of Suntec City’s asset enhancement works in June 2015 and a higher contribution from Suntec City Office Towers and Suntec Singapore Convention & Exhibition Centre.
  2. Distributable income, which includes a capital distribution of S$4 million from the sale proceeds of Park Mall, was at S$60 million, an increase of 7.2% year-on-year. Without this gain, distributable income would have been flat.
  3. Consequently, the REIT’s distribution per unit (DPU) soared 6.3% in the reporting quarter, from 2.23 Singapore cents to 2.371 Singapore cents. Without the gains from the Park Mall sale, Suntec REIT’s DPU for the reporting quarter would have actually dipped by 0.8% from the previous year to 2.213 Singapore cents.
  4. The REIT ended the quarter with a net asset value per unit of S$2.138, up by 1.5% from the S$2.107 seen a year ago.
  5. As of 31 March 2016, Suntec REIT’s debt-to-asset ratio stood at 34.7%, a slight decrease from the 34.8% seen as of 31 March 2015. But, the REIT’s all-in financing cost had increased from 2.53% a year ago to 2.92% and its interest coverage ratio had declined from 4.4 times to 3.6 times.

Operational highlights

Suntec City Mall had undergone asset enhancement initiatives (AEIs) in three phases. The first phase was completed in June 2013, the second phase was finished in June 2014, and the third phase ended in June last year, as mentioned above. Now with the AEIs completed, the committed occupancy at Suntec City’s retail segment stands at 98.7%.

Overall occupancy for Suntec REIT’s retail portfolio is at a healthy 98.6% while the occupancy at the office portfolio is not far behind at 98.3%.

Around 225,000 sq ft of office leases at Suntec REIT were renewed and replaced in the reporting quarter. This leaves the balance of office leases that are expiring in 2016 at just 6%.

Looking ahead

Suntec REIT said that the development of its 177 Pacific Highway property in North Sydney will be completed in the second-half of 2016. The REIT also expects the performance from its retail and office portfolio to be “stable.”

Suntec REIT’s units last changed hands at S$1.745on Thursday. This translates to a historical price-to-book ratio of 0.82 and a trailing distribution yield of 5.8%.

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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.