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Suntec REIT: Q1 2012 DPU 2.453c.

Tuesday, April 24, 2012

I still retain a small position in Suntec REIT at a cost price of about S$1.00 a unit which I purchased towards the tail end of the last financial crisis. This small position is free of cost, actually, since the gain from selling most of my investment in the REIT more than covers its cost. For me, this is what some would call a pillow stock. Sleep on it and get free money.

Gearing: 37.4%

Interest cover ratio: 4.2x

Credit rating: Baa2

NAV/unit: $1.962

DPU: 2.453c (XD 30 April. Payable on 29 May.)

Would I add to my long position or would I sell? I would not be doing either. The REIT's unit price at $1.285 is not expensive but neither is it cheap. So, I am keeping the status quo.

Although the office market remained subdued in the first quarter of 2012, the trust said its overall committed occupancy for the office portfolio enjoyed a strong occupancy of 99.4 per cent as at 31 March 2012.

Committed occupancy for the retail portfolio stood at 97.3 per cent as at 31 March 2012.

The trust is starting asset enhancement works at Suntec City, which is expected to complete by the second quarter of 2013.

Several established brands have signed up for retail space in the newly refurbished Suntec City Mall, including Swedish clothing giant H&M, which will take up 20,000 square feet.

Another major international fashion retailer has also committed approximately 22,000 sq ft with the mall.

In the coming year, the trust said it will focus on the smooth execution of its refurbishment works for Suntec City Mall as well as maintain a high occupancy level for the rest of the mall.

Source: CNA, 24 April 2012.

See slides presentation: here.


Data said...

I was at their AGM last week. Management was quite upbeat about the Suntec mall AEI, but questioners were concerned about the REIT's large discount to NAV, which is not new. Some also believed that the REIT's poor pricing had to do with ARA's regular selling of issued management units. To which the CEO said, we sell the units to pay salaries, we also have to eat... :)

Given the high yield and large discount to NAV compared to REITs with similar assets, wouldn't you say Suntec is still a good bet?

AK71 said...

Hi Data,

Suntec REIT's current unit price is not expensive. For anyone who is thinking of investing for income, buying some at current levels cannot go too wrong.

For me, I already have a long position in the REIT and would only consider adding if its distribution yield is somewhat higher. :)

SnOOpy168 said...

Pillow stocks : i liked this term +-+

Thanks for recent series of updates.

i am curious as to what will be the telling signs to signal a " buy " or at least a direction to a "buy" ? i know that the current prices yield will be a factor.

AK71 said...

Hi SnOOpy168,

With REITs, to me, it is quite simple. If all the numbers are good, I buy when the distribution yield is something which meets or exceeds my expectations.

After all, I am investing for income. So, it is no surprise that distribution yield is a major consideration. However, if the numbers are worrisome, even if distribution yield is 20%, we have to be more wary.

When I divested CitySpring Infrastructure Trust many moons ago, the yield was quite attractive according to some analysts but I looked at the gearing and the NTA/unit, I got cold sweat. More rights issues and a reduction in DPU and its balance sheet still looks weak today.

In the last financial crisis, I loaded up on First REIT and LMIR because their numbers still looked really good with low gearing being an important factor. At prices of 42c and 18.5c per unit respectively then, the distribution yields are till today most attractive.

Some people would disagree with my simple method but it has worked for me. When I strayed from this simple method, I lost money (e.g. FSL Trust). :(

Ah John said...

Totally agree. Just find a simple way and repeat, that Buffett makes money too. Of course, discipline!

AK71 said...

Hi Ah John,

Yes, just stick to a method that works. :)

There could be many methods out there that work. We just have to choose one we are comfortable with. No need to debate which one is better. Peace of mind is priceless.

Discipline. Now, that is something I still have to work on. I still have itchy fingers. ;p

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