Suntec REIT reported its 1Q19 results which met our expectations. Gross revenue declined 1.1% YoY to S$89.7m, while NPI dipped 7.6% to S$58.2m due largely to the sinking fund contribution of S$4.8m for Suntec City Office upgrading works. This has no impact on Suntec REIT’s distributable income.

DPU was flat YoY at 2.434 S cents, and constituted 24.3% of our FY19 forecast. This includes S$6.5m of distribution from capital (~0.242 S cents per unit), which is similar to 1Q18.

Portfolio occupancy was 98.9% for Suntec REIT’s Office segment, and 97.4% for its Retail segment. Average rents of S$9.37 psf/month were secured for Suntec City Office, and this was an encouraging QoQ increase of 2.5% (third consecutive of increase).

On the retail front, operating metrics for Suntec City Mall were also firm, with footfall increasing 3.3% YoY and tenants’ sales psf improving 1.3% YoY in 1Q19.

In terms of Suntec REIT’s financial position, its aggregate leverage ratio came in at 38.6%, versus 38.1% as at end-FY18. We currently have a HOLD rating and S$1.84 fair value estimate on Suntec REIT.

Source: OCBC Research - 24 Apr 2019