My Portfolio Review: Suntec Reit Earnings Report 4Q17

On 24 Jan 2017, Suntec Reit announced that its distributable income for 4Q17 was higher than that of 4Q16 by about 5%. Its distribution per unit (DPU) for 4Q17 was also 0.3% higher than its previous year period (2.604 cents).

For the entire year 2017, distributable income was about 4% higher than its previous financial year 2016. In spite of the enlarged units base, the DPU for 2017 was comparable to the DPU of 2016 (10.005 cents for 2017 vs 10.003 cents for 2016).

Suntec Reit made a gross revenue of about S$87 million for 4Q17, which was lower by about 2% year-on-year. This was largely attributed to reduced takings from Suntec Singapore and Suntec City office as some of the office leases signed in 4Q17 will only start in 2018. This is somewhat mitigated by the increased takings in the retail segment in the same period.

Net property income (NPI) of Suntec Reit for 4Q17 dropped by about 2% when compared to the previous year period to about S$59 million. This was also largely due to the above reason mentioned in the previous paragraph.

For the full year 2017, Suntec Reit’s gross revenue and NPI both rose by about 8% and 9% to about S$354 million and S$245 million respectively when compared to the previous year. These were due to contributions from 177 Pacific Highway though somewhat mitigated by reduced retail takings.

Suntec Reit’s press release report can be accessed through here.

What I think of Suntec Reit’s operational performance for 4Q17

Somewhat mixed results but overall, I feel that it is at least satisfactory. Suntec Reit had an enlarged units base which included the issuing of about 96 million new units on 29 May 2017 probably for overseas property acquisitions. DPU was almost the same compared to previous year 2016 despite the dilution of new units which is good.

Occupancy for the Singapore office portfolio is at a healthy 99.7%; for Australia, “committed occupancy for 177 Pacific Highway maintained at 100% while
the committed occupancy for Southgate Complex (Office) improved to 90.7%” for the year 2017. These are good signs of a healthy leasing environment.

Occupancy for the Singapore retail portfolio was 99% for 2017 while that in Australia was about 92% in Southgate Complex (retail). Which is generally a good sign too.

For 9 Penang Road and 477 Collins Street, construction works are “in progress and are scheduled to complete by end 2019 and mid 2020 respectively”. These are good for Suntec Reit for the long term income prospect as the gross revenue and NPI would probably be higher than current levels after mid 2020. The 2 sites would be yield-accretive by mid 2020 and help support Suntec Reit’s future distributable income and DPU.

According to S&P Capital IQ, the Reit is now overvalued at S$1.920 per unit at this time of writing. Its 52-week high is S$2.25 while its 52-week low is S$1.73, making its current price to be somewhat halfway through the historic high and low. My opinion is to wait for it to drop to near its 52-week low before buying if you are keen in this Reit. Once again, I am not a financial adviser; the information presented here is mainly for informative purposes only. Do read the disclaimer before purchasing such shares.

Thanks and happy trading!

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