Suntec Real Estate Investment (SURVF – Research Report), the Real Estate sector company, was revisited by a Wall Street analyst yesterday. Analyst Lock Mun Yee from CGS-CIMB reiterated a Hold rating on the stock and has a S$1.22 price target.
Lock Mun Yee’s rating is based on a number of key observations concerning Suntec Real Estate Investment’s recent performance and future outlook. The Hold rating comes in the wake of Suntec REIT’s first-quarter results for 2024, which saw a slight decline in gross revenue and net property income due to lower contributions from properties in Australia and The Minster Building in London. Despite a solid performance from Suntec City, the overall distribution income decreased year-on-year, primarily attributed to the completion of capital distribution and increased financing costs. Furthermore, although the Singapore office assets exhibited strong rental reversions and high occupancy rates, the challenges in the Australian office leasing market and anticipated continued drag from the UK property are expected to constrain revenue growth.
Moreover, Lock Mun Yee has factored in the potential impact of higher tenant incentives and the anticipated leasing downtime associated with increased vacancies. As a result of these considerations, the forecasted distribution per unit (DPU) for the fiscal years 2024 to 2026 has been revised downwards, leading to a corresponding decrease in the target price. While positive rental reversions and a stable occupancy rate in Suntec Mall, along with anticipated higher contributions from the convention segment, provide some optimism, the limited near-term growth prospects for DPU over the coming 12 months have led to the recommendation to maintain a Hold position. Key risks that could influence the stock’s performance include the pace of balance sheet strengthening through capital recycling and external economic factors such as interest rate hikes and a potentially weaker macroeconomic environment.
In another report released yesterday, DBS also maintained a Hold rating on the stock with a S$1.15 price target.
SURVF’s price has also changed slightly for the past six months – from $0.815 to $0.812, which is a -0.37% drop .
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Suntec Real Estate Investment (SURVF) Company Description:
Suntec REIT is a commercial REIT that focuses on offices and, to a lesser extent, retail properties. In Singapore, its portfolio consists of Suntec City, which includes one of the largest convention centers and retail malls in Singapore, along with stakes in One Raffles Quay, MBFC Properties, and the development at 9 Penang Road. In Australia, it owns an office tower in Sydney and one in Adelaide; a 50% stake in Southgate (effective at the end of May 2018), a mixed office and retail complex in Melbourne; a 50% stake in Olderfleet, a prime office development in Melbourne; and an office building being developed in Sydney.
