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Friday, November 19, 2010

Suntec REIT: OCBC retains BUY call.

On 27 October, I mentioned "It would be interesting to see what kind of financing structure would be decided upon. It is my assumption that Suntec REIT would issue rights to fund the purchase instead of having a share placement exercise if it is sincere about improving the distributions for unitholders. It could also gear up to 45% (on existing properties, excluding the proposed acquisition) and get about $600 million in loans which would reduce the size of any accompanying rights issue."

See circular to unitholders here.

It seems that there will not be any rights issue as the acquisition would be financed with the proceeds from a private placement of new units and a S$1,105.0 million debt facility. I generally do not like share placements as it does not allow minority unitholders to take part. However, if the new units are issued at a price close to the market price, it is not too big an issue. The acquisition is expected to increase Suntec REIT’s DPU marginally from 8.611c to 8.699c. So, I guess I won't have to do anything here.

OCBC published this today while maintaining its BUY call:
Debt facility secured at very competitive all-in cost of debt of 3.12%; timing, issue price of private placement equity portion dependent on market conditions.


Suntec REIT kept at Buy by OCBC; Best office proxy. Revises issue price assumption down to $1.30 per unit from $1.50, but fair value estimate slips only marginally to $1.63 from $1.64 due to lower-than-expected cost of debt.
Friday, 19 November 2010

Related post:
Suntec REIT: MBFC.
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3 comments:

  1. AK71November 30, 2010 at 9:01 AM

    Suntec REIT raised $428.8 million on Monday through a private placement of new units.

    The trust issued 313 million new units at $1.37 each, nearing the top end of $1.34 and $1.38 range it set earlier, with the placement 3.1 times oversubscribed.

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  2. AnonymousNovember 30, 2010 at 10:11 AM

    Quite demand on that.Must be a good buy.

    TN

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  3. AK71November 30, 2010 at 2:26 PM

    Hi TN,

    Usually, the fear that comes with private placements in a REIT is a lowering in DPU.

    Since this will not be the case with Suntec REIT and, in fact, the DPU will see a marginal increase after the proposed MBFC acquisition and share placement, demand for this REIT should stay robust. :)

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