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Singapore’s Next Blue Chip Idol: Suntec Real Estate Investment Trust

Suntec Real Estate Investment Trust  (SGX: T82U) or Suntec REIT is one of the five reserve companies for the Straits Times Index (SGX: ^STI). In other words, should any of the 30 blue chip companies drop out from the index, Suntec REIT would be one of the candidates to replace them.

Let’s find out more about the real estate investment trust (REIT).

A Closer Look

Suntec REIT was listed on the Singapore market in 2004. The REIT’s portfolio consists of seven properties in the office and retail segment which are located in Singapore and Australia.  These seven properties have a total net lettable area of 3.9 million square feet and are valued at over S$9.4 billion. With such a large asset base producing income for the REIT, let’s look at how it has performed over the last couple of years.

First off, let’s look at its distributable income and distribution per unit.

Source: Suntec REIT’s 2017 Annual Report and earnings presentation

Since 2005, Suntec REIT has seen a steady increase in its distributable income.

Just looking back at the past five years, the REIT has been able to increase its distributable income from S$211.2 million in 2013 to S$263 million in 2017 or an annual growth rate of 5.6%.

While its distributable income has seen solid growth, the same cannot be said for the REIT’s distribution per unit (DPU). The last five years have seen the REIT’s DPU increase from 9.33 cents in 2013 to 10.01 cents in 2017, implying an average growth rate of less 2% per year. The slower growth in DPU can be attributed to a large underlying unit base in 2017 and the redevelopment of two properties in its portfolio.

Moving on, let’s take look at Suntec REIT’s debt profile.

Source: Suntec REIT’s earnings presentation

Suntec REIT’s total debt stood at S$3.46 billion as of 30 June 2018, with an aggregate leverage of 37.9%. The REIT’s all-in financing costs were at 2.74% per annum while its weighted average debt to maturity was 2.8 years. Suntec REIT has an interest coverage ratio of 3.6 times.

Looking at the debt profile, we can see that REIT’s debt is spread out over the next eight years. We also note that its debt is obtained from multiple sources such as loan facilities, medium-term notes, and convertible bonds. The availability of multiple funding options should help the REIT to refinance its loans in the future.

To close, we noted that the REIT’s net asset value (NAV) it has remained rather stagnant moving over the last five years, hovering around the S$2.13 mark. Again, investors should note that two of the seven building in the REITs portfolio are currently under redevelopment. Once completed, we could see an increase in its NAV.

Currently, Suntec REIT trades at a market capitalisation of around S$5.0 billion and pays a dividend yield of 5.3%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore writer Chin Hui Leong owns shares of Suntec REIT.