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What Investors Should Know About Suntec Real Estate Investment Trust’s Latest Earnings and Valuation

Suntec Real Estate Investment Trust (SGX: T82U) is one of the largest REITs in Singapore and currently has interests in retail malls and offices in Singapore and Australia. Its portfolio includes Suntec City, a one-third interest in One Raffles Quay, commercial buildings in Australia, and more.

There are two things about the REIT that investors may want to know about right now: Its latest financial performance and valuation.

Financial performance

The table below shows important items from Suntec REIT’s income statement for the first quarter of 2018:


Source: Suntec REIT 2018 first quarter earnings presentation

We can see that the REIT enjoyed a decent quarter. There was low single-digit growth in gross revenue, net property income, distributable income, and distribution per unit. Suntec REIT attributed its higher gross revenue and net property income to higher contributions from Suntec Singapore and Suntec City Mall, which offset lower contributions from the office component of Suntec City.

As of 31 March 2018, Suntec REIT clocked in a gearing ratio of 35.2%, which is a safe distance from the regulatory gearing limit of 45%. Meanwhile, its occupancy rate stood at 99.1% and 98.4%, respectively, for its office and retail portfolios.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows Suntec REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 42 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts

We can see that Suntec REIT has a lower PB ratio than the market, but a less attractive distribution yield.

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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.