Aggregate leverage ratio is held stable at 41.0%, with its cost of debt down 20 bps q-on-q to 3.62%.
"Tailwinds from sharp interest cost declines are becoming visible, with further declines anticipated in 2026," says Vijay Natarajan of RHB Bank Singapore.
"Operationally, its Singapore outlook – though moderating – remains positive, with upside potential seen from overseas assets," says Natarajan, who has kept his "buy" call and raised his target price from $1.48 to $1.60.
He points out that Suntec is still trading at a 34% discount to its book value and remains a potential M&A target and internalisation candidate.
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Dale Lai of DBS Group Research, citing lowering interest rates across the markets where the REIT operates, believes that investors' concerns over its capital values and interest rates' erosion will gradually turn into tailwinds.
He calculates that a 50bps drop in interest rate could mean a 10% upside to DPUs, which he has not priced in.
Lai, who has upgraded the stock from "hold" to "buy", points out that Suntec REIT is trading an attractive 0.6x P/B with forward yields of 5.3%. In contrast, the REIT's peers at trading at between 0.8x-0.9x. "We believe this relationship could be called into question over time," he says.
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According to Lai, to close the P/B gap, apart from an earnings-led re-rating, we believe that a deeper look at the portfolio and strategic divestments
to deleverage the REIT could be considered.
Lai, who has a target price of $1.40 for this counter, suggests that a potential divestment of its one-third stake in its Marina Bay Financial Centre and One Raffles Quay assets could raise more than $1 billion in capital, which could be accretive.
OCBC Investment Research, too, has raised its fair value but maintains a more conservative stance with its "hold" call. From $1.21, OCBC now figures Suntec REIT is worth $1.30.
OCBC points out that Suntec REIT’s Singapore operations have continued to gain good traction, achieving robust rental reversions for both its retail and office portfolios. Its convention business has also recovered faster than expected.
"However, rental reversions for its Singapore office assets are likely to moderate ahead, and there continues to be uncertainties over the longer-term impact of work from home trends, although more employers appear to be encouraging their employees to return to their offices," says OCBC.
Over in Australia and the UK, Suntec REIT’s office portfolio has been impacted by impairments to its asset valuation given expansion in capitalisation rates and some pressure on occupancy rates, adds OCBC.
As at 10 am, Suntec REIT gained 0.73% to trade at $1.38.
