From the perspective of DBS, while they view this property as a potential pipeline for Suntec REIT, they do not expect any acquisition to materialise in the near term.
“As highlighted in our last August report (“Re-rating catalyst in sight”), several key steps are likely required before the REIT would consider acquiring 9 Penang Road. In the immediate term, management’s priority is likely to be addressing gearing by unlocking value within its existing portfolio,” DBS says.
Based on the estimation by DBS, they foresee that any potential divestments in Singapore such as its one-third stake in One Raffles Quay could significantly improve gearing by approximately 10–12 percentage points.
“Beyond balance sheet optimisation, Suntec REIT will also need to demonstrate sustained operational strength following its strategic review in order to support a re-rating,” DBS adds.
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“This is particularly important as a potential acquisition of 9 Penang Road (estimated to be valued at more than $1 billion) may require equity fundraising to maintain an optimal gearing level,” DBS concludes.
As of 9.40am, Units in Suntec REIT are trading 2 cents lower, or 1.31% down at $1.50.
