4Q14/FY14 results in line with DPU rising 0.6%/0.8% YoY to 9.328/9.400 cents, accounting for 28%/103% of our full-year estimates. Reiterate BUY with a higher DDM-derived SGD2.11 TP (from SGD2.00, 5.5% upside), implying a 10.1% total returns. Suntec City Phase 3 is estimated to be 72% committed, (3Q14: 60%). Office spaces in Suntec City remained fully occupied with an 8.3% increase in rent (SGD8.92 psf/month).
Results in line. Suntec REIT's 4Q14/FY14 DPU rose 0.6%/0.8% YoY to 9.328/9.400 cents, accounting for 28%/103% of our full-year estimate. There was a 0.18 cent DPU top-out in 4Q14, higher than the 0.04 cent paid out in 3Q14. Note that Suntec REIT received SGD147m in cash proceeds from the sale of Chijmes in 1Q12. Since 1Q13, management has topped up SGD53.5m. Financing cost inched up modestly 2.44% from 2.42% in the quarter before while gearing was maintained at 35.5% .
Suntec City Phase 3 asset enhancement initiative (AEI) update. Weestimate that Suntec City Phase 3 occupancy rate reached 72% as of Dec 2014 from 60% in the previous quarter. Overall AEI committed occupancy (the entire Suntec City remaking) to date stands at 91.3%. (3Q14: 86.0%). Rentals for Phase 3 were on the softer side, dragging down overall committed passing rent to SGD12.27 psf/month from SGD12.59 psf/month in 3Q14.
Office occupancy to remain high in coming years. As of end-Dec2014, Suntec City office maintained its full occupancy, with leases for the quarter secured at a higher average rent of SGD8.92 psf/month (3Q14: SGD8.24 psf/month). We are confident that Suntec City office will maintain its high occupancy despite South Beach Development's (SBD) completion in 2015, as SBD has already achieved 80-90% precommitment.
Near-term growth engine. We are optimistic on Suntec REIT's AEIefforts and remin confident that it will drive near-term DPU growth for the counter, following the completion of all three phases at S untec City Mall. We forecast Suntec REIT's DPU to grow at a CAGR of 3.7% over he next three years. Reiterate BUY with a higher DDM-derived TP of SGD2.11 (from SGD2.00), implying P/B ratio of one (cost of equity = 7.5%; TG = 3%).
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....