Meanwhile, amid worries over higher energy costs, the REIT has secured a two-year electricity contract at a lower rate for its Singapore portfolio effective July 1.
Koh estimates that with this contract, which was signed before the fighting in the Middle East, LREIT would be able to cut electricity costs by 15% per annum starting in FY2027 and the electricity tariff is contracted at fixed rate till FY2028.
On the capital management front, Koh notes that LREIT’s interest coverage ratio has improved 0.3 times y-o-y to 1.8 times due to refinancing of perpetual securities in last April and loans for PLQ mall in March at lower cost and divestment of Jem Office in last November.
The refinancing of loans for PLQ Mall has generated annual debt cost savings of $2 million compared to acquisition underwriting. Around 63% of LREIT’s borrowings were hedged to fixed interest rates.
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Hence, Koh is maintaining his “buy” call on LREIT with a target price of 78 cents, noting its attractive FY2026 DPU yield of 6.6%.
Maybank Securities Liu Miaomiao, meanwhile, states in her May 19 report that the upcoming reconfiguration of PLQ Mall will help drive LREIT’s next leg of growth.
LREIT achieved year–to-date retail rental reversion of 12.2%, with PLQ Mall registering reversion in the teens, Jem Retail at high single-digits and 313@somerset at low single-digits.
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She expects rental reversion to be maintained at current level as the asset reconfiguration works at PLQ Mall progress towards completion by the end of this year, with stronger uplift expected to kick in from calendar year 2027 onwards.
Meanwhile, LREIT has refinanced $120 million perpetual securities with remaining $80 million due in June. “Given the conducive debt market, we expect LREIT to refinance using its existing debt capacity while maintaining gearing below 40%,” says Liu.
Given that few financials were disclosed for 3QFY2026, Liu has maintained her forecast for LREIT and kept her “buy” call with unchanged DDM-backed target price of 74 cents.
Phillip Capital’s Hashim Osman, meanwhile, highlighted that LREIT’s portfolio occupancy improved by 0.4 percentage points q-o-q to 95.3%. At the same time, Milan office buildings 1 and 2 had CPI-linked rental uplift of 1.5% from April onwards.
“We expect retail rental reversion to remain in the low double digit range going into 4QFY2026,” states Hashim in his May 20 report.
Meanwhile, the PLQ Mall enhancement work on 16,000 sq ft across both level 1 and 2 have been progressing, with level 1 space already pre-leased and level 2 leasing is in progress.
Hashim foresees income contribution from the reconfigured spaces to begin in 2HFY2027, with peak downtime anticipated between next October and November.
As such, he is maintaining his “buy” call and target price of 73 cents. “LREIT is trading at FY2026 Price/NAV of 0.7 times with a dividend yield of 5.86%. We see strengthening capital structure and PLQ Mall reconfiguration as key drivers, partially offset by the drag from Milan Building 3,” the analyst concludes.
As at 10.35am, units in LREIT were trading 1 cent lower, or 1.77% down at 55.5 cents.
