In his Oct 6 note, Krishna points out that over the past quarter, the SGD base rate, the 3-month SORA, has declined more than 60bps to 1.44% while the 10-year yield has fallen by 30bps to 1.92%, which helps lower financing cost and lift fair value.
Citing Maybank's house view, benign macro conditions are set to continue, with the 3-month SORA forecasted to decline to 1.10% by the end of this year and to 0.70% by next year and a stable 10-year yield.
Meanwhile, GDP growth will be resilient at 3.2% this year and 2.0% next year, with some contribution from retail sales and tourism data.
In August, retail sales, excluding motor vehicles, rose 4.6% y-o-y, a pick up from 4.1% in July; visitor arrivals grew 5% y-o-y for Jul and Aug and occupancy rates rose 1.3%pt to above 90%.
"These factors should be supportive of occupancy and rent reversion for malls," says Guha.
On the capital management front, the REIT in August announced the sale of the office component at Jem for $462 million, in line with valuation.
Following the sale, its DPU will see a 2.2% dilution and NAV down by 1.3% on a pro-forma basis.
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Yet, the deal will strengthen the capital structure by lowering gearing to 35% from 42.6% and help position the REIT for future growth.
"The REIT’s strategic focus is Singapore, with future collaboration with its sponsor to explore M&As with growth potential and opportunistic non-core disposal," says Guha.
For the coming FY2026 and FY2027, Guha has raised his DPU forecasts by 3.9% and 1.6%, respectively, on the back of lower borrowing cost.
Coupling this with lower cost of equity, he has raised his target price to 69 cents from 57 cents.
Lendlease Global REIT units changed hands at 65 cents as at 9.54 am, down 0.77%.
