Office more of the same. As expected, average office renewal rents dipped to $8.24psf/mth vs $9.90psf/mth in Q1 but still resulted in positive rental reversions. Office portfolio occupancy dipped to 95% in Q2 and is expected to stabilize at this level for the rest of this year. The retail component remained relatively flat. Looking ahead, office rents is expected to continue to dip, but at a smaller pace. Current asking rents is still at about $8psf.mth. The group has a remaining 4.5% of NLA to be renewed in FY09 and another 26% in FY10. To improve connectivity from the upcoming opening of the Circle Line station at Suntec Mall, some minor enhancement works are planned over the next few months but capex should remain small.
Maintain Buy. Suntec's valuations are undemanding at FY09 and FY10 DPU yield of 10.1% and 8.3% and P/bk NAV of 0.53x. Suntec's balance sheet is healthy at 33.9% gearing and no refinancing needs till 2011. Maintain Buy with revised TP of $1.18.
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