Sunday, May 12, 2019

Suntec Reit Ideas

Amidst the market movement this week, I have been on the hunt for any stocks to buy to add to my portfolio. I am sure the most prominent piece of news that caught everybody's attention was the two Trump tweets which knocked off $1.3 trillion off the global markets this week, where tariffs on USD 200 billion have already been effected. Recently, Trump even said 'a no rush' about the China deal. In the worst scenario, tariffs might lead to a continued slide in Singapore markets (it caused quite a drop this week) but we will see.

One stock which caught my eye was Suntec Reit, which looked cheaper as compared to its peers (it is currently trading at a price of 1.79 as of 10 May 2019.

Here is the performance for this quarter here.

Source: Suntec Reit 1Q 2019 Financial Presentation


Net Property Income dropped from last quarter, where possible reasons could be the depreciation of AUD against SGD and lower NPIs from its constituents (Suntec City and Suntec Singapore). Distribution Per Unit remains constant with about +0.04% y-o-y. Furthermore, office accounts for 66% of NPI and Singapore accounts for 85% of NPI. Net Asset Value stands at $2.09 which gives us a 30 cent discount over its current price. In terms of interest rate matters, average cost of debt is 3.04% and 77% fixed. However, I think this will largely depend on the Federal Reserve interest rates, which has yet to see a standstill with Trump.

Furthermore, looking at the occupancy numbers, Weighted Average Lease Expiry (WALE) is 2.24 years for Singapore and 5.37 years for Australia. Longer WALE might be more predictable and stable but since the bulk of money comes from Singapore (85%), a 2.24 year WALE may be worth zooming in to see if the economy will continue to strengthen beyond 2020 (or weaken).

I will be looking to buy the stock at a favorable price, where its last 52-week low was at 1.63 and I did have the intent to buy. But we will see again.

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