Suntec REIT reported an in-line set of 4Q16 results this morning. Gross revenue inched up 1.6% YoY to S$87.5m, as contribution from 177 Pacific Highway after practical completion offset the loss of income from the divestment of Park Mall and lower revenue for Suntec Singapore. DPU declined 5.6% YoY to 2.596 S cents given the drag from a lower NPI, higher borrowing costs and cessation of income support for MBFC properties.

For FY16, Suntec REIT’s gross revenue was down marginally by 0.3% to S$328.6m, while DPU was flat at 10.003 S cents. Both figures formed 99.9% of our full-year forecasts.

Office leases signed in 4Q16 came in at an average rent of S$8.65 psf/month, slightly lower than in 3Q16 (S$8.78 psf/month), while committed occupancy for its office portfolio was at a healthy 99.3%. Occupancy for its retail portfolio stood at 97.9%, as at 31 Dec 2016, with overall committed rent relatively stable at S$11.20 psf/month, versus S$11.19 psf/month, as at 30 Sep 2016. We will provide more details after the analyst briefing.

For now we have a SELL rating and fair value estimate of S$1.53.

Source: OCBC Research - 25 Jan 2017