Saturday, August 3, 2013

Company in focus - Suntec REIT

I've always liked this REIT as its portfolio of properties are in Singapore and its business is relatively easy to understand. REITs invest in a portfolio of properties and are professionally managed by their team. Income generated from the rental of properties are collected and distributed to shareholders of the REITs. In Singapore, REITs distribute 90% of rental collected to shareholders.

Suntec REIT has the following properties in their portfolio:

100% of Suntec City mall
100% of Suntec City office towers
60.8% of Suntec Singapore international convention and exhibition centre
100% of Park Mall
1/3 of One Raffles Quay
1/3 of Marina Bay Financial Centre

All its properties have very high occupancy rate at more than 97% as at 31 December 2012.
Currently, Suntec City is undergoing a major asset enhancement project who aims to transform the whole of suntec city to a new look. The asset enhancement at the Suntec city convention centre has been completed and now there are more shops and eateries there. Suntec City mall is still undergoing renovations and is scheduled to complete in mid 2015.

The NAV for the trust is 1.93 at 30/06/13. Thus, it is trading at a discount to NAV of 18% at the current price of $1.60. The REIT is set to benefit from the completion of its asset enhancements which will bring in more revenue for itself. This also means distribution to shareholders is set to increase in the next 2 years.

The yield currently is around 5-6% annually. I have bought at much lower prices before in Suntec thus i do not find current prices too attractive. Furthermore, with interest rates set to rise in the next 2 years, a 5% yield will no longer be attractive in the future. Of course, you can still buy at current prices if you're investing for income. The price is not too high and not too low. It can still go lower. If you buy now, make sure you have holding power to hold the stock and also more money to buy at even lower prices. By averaging down, you can always buy more at lower prices and your overall price will be much lower in the long run. I do not encourage averaging down generally for other stocks. REITS have assets and are generally safe thus averaging down is possible. For other types of stocks, you'll have to analyse the business yourself and determine if it will be still strong many years down the road.

Related Posts:
1. Company in focus - Breadtalk
2. Company in focus - Neptune Orient Lines (NOL)
3. Company in focus - Select Group


  1. Bro, the saving interest rate has been below 0.1% for the past few years. Even if the rates shot up, it can't be above 5% in the short term!

    1. Hi Greatsage,

      Bank deposits interest rate will never go above 5%. If we see 1% its already very good. I'm not really comparing to saving interest rates.