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Suntec Real Estate Investment Trust’s Latest Earnings: DPU Rises 2.3%

Yesterday, Suntec Real Estate Investment Trust (SGX: T82U) released its 2017 first quarter earnings report. The reporting period was from 1 January 2017 to 31 March 2017.

As a quick background, the real estate investment trust has partial stakes in a commercial building under development (formerly Park Mall) and parts of Suntec City.

It also has a one-third interest in each of One Raffles Quay, Marina Bay Financial Centre (Tower 1 and Tower 2) and the Marina Bay Link Mall. Last but not least, the REIT has investments in Australia as well – they are a full interest in a commercial building in Sydney, and a 25% stake in Southgate Complex in Melbourne.

You can catch up with the results from Suntec REIT’s last quarter here.

Financial highlights

The following’s a quick summary on some of the REIT’s latest financial figures:

1. Gross revenue rose 12.9% to $88.4 million compared to the same quarter a year ago.

2. Net property income (NPI) climbed 14.6% year-on-year to $61.8 million.

3. Suntec REIT’s share of profits from joint ventures rose 22.9% from $16.0 million in 2016’s first quarter to $19.7 million in the reporting quarter. The share of profits come from the REIT’s one-third interests in One Raffles Quay, Marina Bay Financial Centre (Tower 1 and Tower 2), and the Marina Bay Link Mall, as well as its 30% stake in the aforementioned commercial building that’s under development.

4. The distribution per unit (DPU) was 2.425 cents for 2017’s first quarter, a 2.3% increase from the 2.371 cents paid in the first quarter of 2016. DPU from operations rose by 4.2% year-on-year to 2.307 cents. The remaining 0.118 cents (down 25.3% year-on-year) came from capital distribution.

5. The REIT reported an adjusted net asset value per unit of $2.12 as of 31 March 2017, up slightly from the $2.114 seen a year ago.

Beyond these, Foolish investors may also want to keep an eye on the REIT’s debt profile. The debt profile provides clues on how the REIT is funded and its sensitivity to the interest rate environment. Suntec REIT’s debt profile is summarised below:

2017-04-27 Suntec REIT Debt Table
Source: Suntec REIT’s earnings presentations

Suntec REIT’s total borrowings increased to $3.34 billion in the reporting quarter. At the same time, its aggregate leverage climbed to 37.7%. On the positive flipside, the REIT’s financing cost fell to 2.42% while its interest coverage ratio increased to 4.3 times.

In terms of refinancing activity, Suntec REIT has completed its debt-refinancing for 2017. But, the REIT still has $1.1 billion in borrowings to refinance for 2018. Suntec REIT’s weighted average debt to maturity is currently 2.56 years.

Operational highlights

On the retail side of Suntec REIT’s business, the occupancy rate was 98.0%. The office portfolio also had a strong occupancy rate of 98.9%. These figures were largely unchanged from a year ago when they were 98.6% (for retail) and 98.3% (for office).

Chan Kong Leong, the chief executive officer of the REIT’s manager, shared the following statement in the earnings release to sum up the reporting quarter:

“Notwithstanding the uncertainties in the macroeconomic environment and challenging operating conditions, we are pleased to have delivered a higher distributable income and DPU for the first quarter of 2017. Our asset in Sydney, 177 Pacific Highway, which received practical completion in August 2016, contributed to our robust performance this quarter.”

Chan also commented on the redevelopment of Park Mall:

“We are pleased to report that development works for the new Grade A commercial building at 9 Penang Road is currently on track and we have received the Building Plan approval on 31 March 2017.”

Outlook

Suntec REIT also provided this outlook in its earnings release for its operations in Singapore:

“Looking ahead, the Manager will continue its proactive asset management to maintain its high occupancy level as the Singapore office market is expected to remain under pressure given the impending office supply and shadow space.

The market sentiments for the Singapore retail sector remained weak in the first quarter of 2017 as retailers continued to consolidate poorer performing outlets.

Despite the challenging retail market, Suntec City mall’s overall committed occupancy improved to 98.4% as at 31 March 2017. The Manager will continue its active tenant adjustments to fine tune the trade mix and further strengthen the positioning of Suntec City mall.”

Suntec REIT’s units closed at $1.75 each on Wednesday. This translates to a historical price-to-book ratio of 0.83 and a distribution yield of around 5.7%.

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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 Chin Hui Leong owns units in Suntec Real Estate Investment Trust.