Suntec REIT reported its 1Q18 results this morning which met our expectations. Gross revenue rose 2.6% YoY to S$90.7m, while NPI grew 1.9% to S$63.0m. The latter formed 25.1% of our FY18 forecast.

Growth was underpinned by higher revenue from Suntec Singapore and an increase in retail revenue from Suntec City mall, but partially offset by weaker office revenue.

DPU for the quarter was flat (+0.3% YoY) at 2.433 S cents and constituted 24.2% of our fullyear forecast, but was once again boosted by a higher distribution from capital of S$6.5m (1Q17: S$3.0m). Overall portfolio occupancy was firm for its office (99.1%) and retail (98.4%) segments.

Average rents of S$9.02 psf/month and S$8.95 psf/month were secured for its Singapore office portfolio and Suntec City office, respectively. This was a robust 6.1% and 11.5% QoQ increase, respectively, reversing two consecutive quarters of decline.

On the retail front, operating metrics for Suntec City Mall were also bright, with footfall increasing 12.7% YoY and tenants’ sales psf improving 5.2% YoY. We will be reviewing our SELL rating and S$1.81 fair value on the stock.

Source: OCBC Research - 25 Apr 2018