Suntec REIT (SUN) recently announced its first acquisition in Australia.
Though this exercise is expected to be yield accretive, financing it solely
through debt could potentially raise gearing to an undesirable level.
This acquisition could boost SUN's
DPU by 4.7% with stable long-term
income. However,
1) the resulting
higher net gearing level,
2) foreign
currency exposure and
3) forecasted
yield from this property based on a
higher-than-current market rental
rate, could potentially offset the
positive DPU uplift.
Maintain
Outperform with unchanged
DDM-based (discount rate of 7.9%)
TP of S$1.91 as we await for more
information from the upcoming
analysts briefing on Monday.
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