buy sell hold 2021




Suntec REIT
Recovery in sight

■ 1H22 DPU of 4.81 Scts is slightly below our estimates, but in line with street.
■ Robust office performance; retail and convention segments turning around.
■ Upgrade to Add from Hold with an unchanged TP of S$1.79.

1H22 results highlights

SUN reported 1H22 gross revenue of S$203.5m (+22.1% yoy), while distributable income
rose a higher 16.9% yoy to S$138.7m with the inclusion of S$11.5m of capital distribution.
1H22 DPU was 4.81 Scts, +15.8% yoy (46.3% of FY22F). A better operating performance
was due to contributions from The Minster in the UK and higher income from Suntec City,
21 Harris St and 477 Collins St, partly offset by lower occupancy at 177 Pacific Highway
and weaker A$. As at end-1H, office/retail’s committed occupancy stood at 97%/95.3%.
Post a revaluation exercise in Jun 2022, SUN’s gearing stood at 43.1%. All-in financing
cost stood at 2.51%, and 56% of SUN’s debt are hedged into fixed rates. Management
guided that every 50bp increase in funding cost would impact distribution income by 4.7%.


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Multiple growth levers

■ 1H22 DPU of 1.46 Scts was in line, at 48.7% of our FY22F forecast.
■ Strong portfolio operating metrics, with room for upside from AEIs.
■ Reiterate Add rating with an unchanged TP of S$0.51.

1H22 results highlights

In its maiden post-merger results, ELOG posted 1H22 gross revenue of S$147.7m, +23.2% yoy, while net property income rose 18.2% yoy to S$102.8m. The uplift was due to revenue contributions from ALOG, following the completion of the merger on Apr 2022, and positive rental reversions, partly offset by higher utilities expenses.

1H22 NPI margin averaged 69.6% vs. 72.9% a year ago. Income available for distribution grew 29.65 yoy to S$73.6m. Together with 2Q22 DPU of 0.737 Scts (including clean-up distribution of 0.187 Scts), 1H DPU totalled 1.46 Scts. ELOG revalued its Australian properties resulting in BV/unit of S$0.365.


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Frasers Centrepoint Trust
Tenant sentiment holding up

■ Suburban malls continue to outperform its peers in this phase of recovery, delivering tenant sales above pre-COVID levels and positive reversion.
■ Strong leasing momentum continued into 3Q; 35% of GRI signed YTD 9M22.
■ Reiterate Add rating with unchanged DDM-based TP of S$2.75.
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Suntec REIT (SUN SP)
1H22: Held Back By Higher Interest Rates

Operationally, management has done a superb job by generating positive rental reversion of 5.7% for the Singapore office portfolio and 3.2% for Suntec City Mall. Income from its JVs (MBFC, ORQ and Nova Properties) grew 5.5% yoy. Management intends to maintain capital distribution at S$23m per year for two years. Although 2022 distribution yield of 6.3% and P/NAV of 0.75x are attractive, we await a more opportune time to re-enter the stock. Maintain HOLD. Target price: S$1.72.


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Suntec REIT (SUN SP)
Rent Rise On Reopening

Strong 1H22, fundamentals intact

2Q22 DPU rose 15% YoY and 1% QoQ, driven by improvement at Suntec City and contribution from its London properties. Occupancy improved with demand recovery, and we expect fundamentals for SUN’s office and retail assets to strengthen further with rising rents.

The results were slightly ahead and we raise our DPU forecasts by 1-2% on a stronger rent recovery. Gearing remains high and could prompt capital recycling; we see favourable risk-reward at c.6% yield and visibility on capital distributions (c.SGD0.2cts per quarter to 4Q23). Our DDM-based TP stays at SGD1.85 (COE: 6.8%, LTG: 2%). BUY.


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Frasers Centrepoint Trust (FCT SP)
Resilient Mall Metrics

Stable occupancies, strong tenant sales growth
FCT saw stable portfolio occupancy of 97.1% in 3Q22 (vs 97.8% in 2Q22) and positive rental reversion. Tenant sales growth, having gained traction, looks set to improve with recovering shopper traffic. Strong leasing momentum, tenant remixing and high mall occupancy should support rental upside.

We continue to see suburban malls anchoring Singapore’s retail sector recovery during the reopening phase, with resilient operating metrics for FCT’s sizeable suburban malls portfolio underpinning its DPU visibility. Our forecasts and DDM-based TP of SGD2.80 (COE: 6.2%, LTG: 2.0%) are unchanged. BUY.


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