FY13 results in line with our and market expectations. Highest quarterly DPU since 4Q09. 

 

FY13 DPU of 9.328 SGD cts includes a 0.839 SGD cts top-up (total SGD19m) from the sales proceeds of CHIJMES for capital distribution. 

 

Pre-commitments for Phase 2 leases for Suntec City AEI hit 97% and opens in early 2Q14. Phase 3 works will start next month. 

Following the massive SGD410m AEI on Suntec City, Suntec’s FY13 revenue contracted by a modest 10.6% YoY to SGD234m, forming 96.5% of our and 98% of consensus estimates. Full-year DPU declined 1.7% YoY to 9.328 SGD cts, constituting 101% of our and 102.5% of consensus forecasts. The amount included a top-up of 0.839 SGD cts (total SGD19m) from the sales proceeds of CHIJMES for capital distribution. Stripping out the top-up, FY13 DPU would have been 8.489 SGD cts (-10.5% YoY). Aggregate leverage inched up to 39.1% from 38.6% last quarter following new borrowings. Net financing costs for FY13 averaged 2.5% with an average term of 2.44 years. 

Committed occupancy for Phase 1 leases hit 99.6% with average passing rent of SGD13.09 psf per month. Suntec also said that 97% of Phase 2 NLA has been pre-committed (previous quarter: 83.7%). Among the brands that have signed up are Marche, McDonald’s, Andersen and Etude House. Phase 2 works will complete in April while Phase 3 AEI will commence next month. Our investment thesis on Suntec remains intact. In this growth-limited environment, Suntec is one of the very few S-REITs that has a DPU CAGR of 4.2% from 2013-2016 (13.3% over three years), following the rental reversions from the major overhaul at Suntec City. Maintain BUY with an unchanged DDM-derived TP of SGD1.75 (discount rate of 8%).

 

Source: Maybank Kim Eng Research - 24 Jan 2014