10 Quick Things Investors Should Know About Suntec Real Estate Investment Trust’s Latest Earnings

Suntec Real Estate Investment Trust (SGX: T82U) released its 2018 third-quarter earnings update earlier today.

As a quick introduction, Suntec REIT is one of the largest REITs in Singapore. The trust’s portfolio includes the iconic Suntec City, a one-third interest in One Raffles Quay, a commercial building in Sydney and a 50% stake in Southgate Complex in Melbourne.

Without further ado, here are 10 things investors should know about Suntec REIT’s latest results:

  1. Gross revenue declined 2.5% to S$88.8 million while net property income fell by 11.4% to S$56.5 million.
  2. Yet, the REIT’s distribution per unit (DPU) was up by 0.3% year-on-year to 2.491 cents.
  3. Based on Suntec’s 2018 annualized DPU of 9.86 cents and its unit price of S$1.80 (as of writing), the REIT has a trailing distribution yield of 5.5%.
  4. As of 30 September 2018, the REIT’s gearing stood at 38.2%, which is still a reasonable distance away from the regulatory ceiling of 45%.
  5. The REIT’s portfolio had a committed occupancy rate of 98.9% and 98.1%, respectively, for its office and retail properties at end of the quarter.
  6. The weighted average lease expiry (by net lettable area) was at 2.58 years and 3.92 years, respectively, for the retail and office portfolios.
  7. In the latest quarter, income contribution from joint ventures was up by 4.1% year-on-year to S$23.2 million.
  8. In the quarter, the REIT reported that HSBC signed a 10-year lease at Marina Bay Financial Centre Tower 2. Fit out work for the bank’s new headquarters is expected to commence in the second-half of 2019 with target occupation by April 2020.
  9. Suntec City Mall’s footfall and tenant sales grew 5.5% and 5.4%, respectively, on a year-on-year basis.
  10. To close, the REIT commented on its outlook:

“The Singapore office market continued to improve in the third quarter of 2018. Against the backdrop of a firm leasing market and tightening of supply, overall CBD rents grew by 2.3% to S$9.93 psf/mth while the overall CBD occupancy increased by 0.8% to 91.6%. Looking ahead, the Manager will continue its proactive asset management to strengthen the office proposition and maintain a high occupancy level for its Singapore portfolio.

The Singapore retail market was stable in the third quarter of 2018. Demand for retail space remained firm consisting mainly from F&B and DIY activity-based retailers.The multi-pronged strategy that the Manager executed for Suntec City mall had yielded positive results and the mall is poised to continue to perform well, notwithstanding the continuing challenges in the retail sector.

In Australia, the national office CBD occupancy increased by 0.5% to 90.6% in the second quarter of 2018. Leasing activity continues to be positive in the Sydney, North Shore and Melbourne office markets driven mainly by flight to quality and expansionary activities. Looking ahead in 2019, occupancy and rental levels are expected to remain high given the strong occupier demand coupled with limited new supply. In view of the rising interest rate environment, the Manager will continue its prudent capital management strategy and proactively manage the refinancing of loans due in 2018 and 2019.

The Manager also monitors the Group’s foreign currency exposure to the Australian dollar on an on-going basis and will manage its exposure to movements in the currency through suitable financial instruments”

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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.