Soilbuild Business Space REIT’s (Soilbuild REIT) 2Q18 results were within expectations with 1H18 NPI dropping 12.4% YoY to S$33.2m, or 50.0% of our initial full-year forecast. 1H18 DPU dropped a corresponding 12.4% YoY to 2.588 S cents, or 50.8% of our initial full-year forecast.

We see signs of stabilization on a QoQ basis – 2Q18 NPI fell 4.4% QoQ and this was mainly due to the divestment of KTL Offshore in Feb 2018. The portfolio occupancy rate remains steady at 87.6%.

Looking ahead, the REIT manager expects to benefit from the conversion of the Solaris master lease to a multi-tenanted building in Aug 2018.

We note that since our upgrade to Buy on 29 Mar, Soilbuild REIT has posted total returns of 4.4% versus the FTSE Straits Times Real Estate Investment Trust Index’s 0.8%.

We maintain BUY but place our fair value of S$0.71 under review pending further details from the briefing.

Source: OCBC Research - 17 Jul 2018