Suntec Real Estate Investment Trust’s Price Is Up 12% In 1 Year: Here’s Why

Suntec Real Estate Investment Trust (SGX: T82U) is one of the largest REITs in the Singapore stock market and it currently has interests in retail malls and offices in Singapore and Australia.

Its portfolio, which is concentrated more toward Singapore, includes Suntec City, One Raffles Quay, Park Mall and a commercial building in Australia, just to name a few.

Over the last 12 months, the REIT’s unit price has climbed by 12%. What may have caused this?

Reasons for a gain

There can be many reasons behind a REIT’s price increase.

But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related. The former deals with how a REIT’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the REIT’s distributions and occupancy rates.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The case with Suntec REIT

In Suntec REIT’s case, it appears to be the former at work.

In the REIT’s 2016 third quarter earnings, it reported that both its retail and office markets had faced challenges, resulting in a weaker revenue and net property income.

Yet, the REIT’s office and retail portfolios had occupancy rates of 99.4% and 97.3%, respectively. In the same quarter a year ago, both rates were at 98.9% and 96.5%. Moreover, the REIT’s Singapore-based office portfolio occupancy rate of 99.3% compares favourably to the market’s occupancy of just 92.8%.

The REIT’s distribution per unit (DPU) in the first nine months of 2016 is also up by 2.8% from 7.252 cents a year ago to 7.407 cents.

A Foolish conclusion

As we’ve seen above, Suntec REIT reported growth in its distribution in its latest earnings and turned in strong occupancy rates relative to the market.

Suntec REIT had acquired a partial stake in a property in Melbourne in late 2016 and its contributions have not been reflected in the REIT’s results yet. So going forward, Suntec REIT’s earnings may be more reflective of the combined performances of the commercial and retail property sectors in both Singapore and Australia.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.