SUNTECREIT(SUN.SP)：THE_SUN_SHINES_BRIGHTER_HERE-2012-10-08.ppt

3,107.76,89.8,8.3,%,6.23,39.3,3.7,4.2,co. reg no: 198700034e mica (p) : 099/03/2012 singapore,results preview buy (from hold),suntec reit,8 october 2012,share price: target price:,sgd1.53 sgd1.66 (previously sgd1.42),the sun shines brighter here dpu top-up unlikely in 3q12. as a result of phase 1 aei work, which started in jun 2012, we expect revenue from suntec mall to slide from sgd103m in fy11 to sgd86m (16% decline) in fy12f. occupancy,ong kian lin .sg (65) 6432 1470 stock information description: suntec real estate investment trust is a real estate investment trust established with the objective of investing in income-producing real estate properties which are used primarily for retail and office purposes.,rate is likely to fall to 75-78% by year-end (excluding the space vacated by carrefour). carrefour takes up some 137k sq ft of nla and will likely depress occupancy rate to 60% when its lease tenure expires 31 dec 2012. nonetheless, we are confident that suntec reit should be able to pay out dpu of at least 2.15 singapore cents for 3q12 and at least 9.0 singapore cents for the full year. we also do not think that suntec will use its chijmes divestment proceeds to top up its 3q12 dpu. it may want to keep this flexibility for 4q12 when there is greater clarity on its full-year distributable income. aei making good progress. from our observation, refurbishment works have been progressing well, with suntec convention and the,ticker: shares issued (m): market cap (usd m): 3-mth avg daily turnover (usd m): st index: free float (%): major shareholders: suntec city development key indicators roe annualised (%) debt to deposit assets (%): nav/shr (sgd): interest cover (x): historical chart,sun sp 2,242.9 2,796.3 1.98,galleria/fountain terrace zones proceeding full steam ahead. food republic has ceased operations and tenants at fountain food terrace are expected to vacate by end oct. we think pre-commitments for phase 1 leases should hit at least 65% presently and phase 2 aei should commence on time by apr-may 2013. we estimate that the largest dip in mall occupancy should occur in fy13f at 59%, but this will improve in fy14f to 70%. office portfolio in good shape. against a background of office supply glut (pipeline supply of 24% of available downtown core stock by 2012-2016) and high vacancy rates (downtown core vacancy at 13% in 2q12), we are heartened that suntec has secured 100% occupancy for suntec office, park mall office, one raffles quay and 99.5% for mbfc1. with less than 22% of office leases nla expiring per annum for the next three years, we remain positive that suntecs proactive leasing management will tread cautiously to optimise its office portfolio. upgrade to buy on brighter prospects. there are only a handful of s-reits that offer yields of more than 6% but are trading at discounts to book. suntec is one of them, with a yield-spread of 463bps compared to the sector average of 436bps. with all its assets and income contribution from singapore, we believe investors will continue to favour suntec in the absence of forex risk (all sgd), highly-liquid s-reit counters (adtv usd8m) and investable alternatives. in addition, in this inflationary and yield-chasing climate, yields for suntec could be compressed further to 5.5% in our view. upgrade to buy with a higher target price of sgd1.66. suntec reit summary earnings table fye dec (sgd m) fy10 fy11 fy12f fy13f fy14f revenue 249.5 270.3 254.0 263.7 295.1,net property income distributable income,193.1 193.4 182.5 220.7,195.5 207.0,205.4 201.5,229.2 213.7,performance:,dpu (sg cts),9.9,9.9,9.2,8.9,9.4,52-week high/low,sgd1.54/sgd1.05,dpu growth (%) dpu yield (%),-15.8 6.4,0.7 6.5,-7.3 6.0,-3.4 5.8,5.2 6.1,1-mth,3-mth,6-mth,1-yr,ytd,p/bv (x),0.8,0.8,0.8,0.8,0.8,absolute (%) relative (%),5.9 2.1,12.9 8.0,22.9 18.1,43.7 16.9,42.3 21.2,gearing (debt-to-deposited assets) (%) roe (%),39.4 9.7,38.0 14.3,37.1 5.4,37.4 5.3,37.1 5.6,roa (%),5.8,8.4,3.3,3.2,3.3,source: company, maybank ke see appendix i for important disclosures and analyst certifications,suntec reit figure 1: proposed phasing of works (1 jun 2012 end-2014) source: company figure 2: suntec conventions aei moving full steam ahead source: company, maybank ke,8 october 2012,page 2 of 10,suntec reit figure 3: refurbishments underway at various sections of suntec mall source: company, maybank ke figure 4: fountain food terrace will be vacated by end oct. source: company, maybank ke figure 5: mbke estimates for suntec mall,(sgd m) gross revenue npi npi margin full-yr occupancy,fy11a 103.00 77.00 75% 97%,fy12f 86.76 64.81 75% 86%,fy13f 72.01 53.79 75% 59%,fy14f 90.26 67.42 75% 70%,fy15f 138.39 103.38 75% 100%,source: maybank ke,8 october 2012,page 3 of 10,13nov06,13nov07,13nov08,13nov09,13nov10,13mar07,13mar08,13mar09,13mar10,13may07,13mar11,13nov11,13may08,13may09,13may10,13may11,13mar12,13jan07,13jan08,13jan09,13jan10,13jan11,13sep06,13sep07,13sep08,13sep09,13sep10,13sep11,13jan12,13jul07,13jul08,13jul09,13jul10,13jul11,suntec reit figure 6: swot analysis,strengths,weaknesses, strategic location of assets (all within concentration risk on suntec,city centre). all singapore-based.,city (53% of fy12 gav)., all sgd rental income. no forex risk. “flight to quality” vacancy risk, affiliation with cheung kong holdings and the hk tycoons who previously owned suntec city. ongoing enhancements at suntec city (organic growth). opportunities possible acquisition of one-third stake in mbfc phase 2. cross-fertilisation effect from south beach development (due to complete in 2015). more office workers to patronise suntec mall.,at suntec office mitigated to a certain extent by a large number of non-fi tenants (eg, service industry, trading, manufacturing, real estate) which makes up 78.3% of total. isolation risk for suntec city (separation from marina bay new downtown and raffles place). threats macro-economic headwinds. impending office supply glut in downtown core. equity fund raising for mbfc phase 2 acquisition (possibly next year and beyond)., capitalise on the rising popularity of more government land sales,singapore as a mice destination of choice.,(gls) in marina bay area to drive down office rent in a bid,to maintain competitiveness. source: maybank ke figure 7: suntec reit is presently trading at 463 bps yield-spread.,risk-free,dpu yield,spreads,25.0% suntec reit min spreads 48 bps max spreads 2020 bps 20.0% 15.0% 10.0% 5.0% 0.0% source: bloomberg, maybank ke,8 october 2012,page 4 of 10,suntec reit figure 8: dividend discount model (ddm),ddm dpu (sg cts):,fy12f 9.21,fy13f 8.90,fy14f 9.36,fy15f 10.74,terminal value 172.62,fair value cost of equity terminal growth,1.660 7.0% 1%,source: maybank ke figure 9: suntec reit fy12f gav 100%,90% 80%,21%,70% 60% 50%,8%,4%,14%,100%,40%,30% 20% 10% 0%,53%,suntec city (office + m all),suntec co nventio n,p ark m all,one raffles quay,m b fc1 (33% interest),to tal,8 october 2012,source: maybank ke,(co nso lidated if 100%),(33% interest),page 5 of 10,fv,suntec reit,profit and loss (sgd m),balance sheet (sgd m),fye dec gross revenue property expenses net property income share of profit of jce other income amortisation costs management fees trust expenses net financing costs others net income b/f tax & change in change in fv of inv pty others income tax total return non-tax deductibles & oer adj distributable income dpu (sg cts),2010a 249.5 -56.4 193.1 30.9 22.4 -20.9 -27.9 -2.7 -55.9 0.0 139.0 248.7 0.0 -2.0 385.7 -203.2 182.5 9.9,2011a 270.3 -76.9 193.4 141.7 47.7 -39.3 -36.1 -5.3 -51.8 0.0 250.3 396.2 -5.9 -6.0 634.6 -413.9 220.7 9.9,2012f 254.0 -58.4 195.5 47.5 31.6 -20.0 -31.3 -2.5 -37.3 0.0 183.5 25.5 39.5 -3.5 245.0 -38.1 207.0 9.2,2013f 263.7 -58.4 205.4 49.8 30.0 -20.0 -32.2 -2.6 -37.7 0.0 192.6 52.3 0.0 -3.3 241.7 -40.2 201.5 8.9,2014f 295.1 -66.0 229.2 61.2 10.0 -20.0 -33.6 -3.0 -38.8 0.0 204.9 54.2 0.0 -1.1 258.0 -44.3 213.7 9.4,fye dec total assets current assets cash & equivalent trade receivables others non-current assets investment properties plant & equipment others total liabilities current liabilities trade and other payables short term borrowings others long-term liabilities long-term debts others unitholders funds,2010a 6,652.1 59.9 52.5 3.3 4.2 6,592.1 4,452.0 0.0 2140.1 2,667.4 478.9 41.1 404.6 33.2 2,188.5 2,150.1 38.5 3,984.6,2011a 7,516.7 262.7 104.4 13.6 144.7 7,254.1 5,098.1 7.9 2148.1 2,970.1 305.6 80.9 200.0 24.7 2,664.4 2,604.1 60.3 4,433.8,2012f 7,489.1 99.1 85.5 12.7 0.8 7,390.0 5,233.2 7.9 2148.9 2,879.4 756.2 61.5 670.0 24.7 2,123.1 2,076.8 46.4 4,496.9,2013f 7,651.1 77.8 63.7 13.2 0.9 7,573.3 5,415.3 7.9 2150.0 2,975.4 859.7 61.5 773.5 24.7 2,115.7 2,069.4 46.4 4,562.8,2014f 7,763.2 67.8 52.0 14.8 1.0 7,695.4 5,536.2 7.9 2151.3 3,016.3 775.6 69.4 681.5 24.7 2,240.7 2,194.3 46.4 4,634.0,non-controlling interests,0.0,112.8,112.8,112.8,112.8,cash flow (sgd m),key ratios,fye dec,2010a,2011a,2012f,2013f,2014f,fye dec,2010a,2011a,2012f,2013f,2014f,operating cash flows,206.4,216.7,156.8,222.4,234.8,growth (% yoy),total return before tax,139.0,250.3,183.5,192.6,204.9,sales,-1.4,8.3,-6.0,3.9,11.9,adjustments for,npi,0.4,0.2,1.1,5.0,11.6,net interest expense depreciation mgt fees in units,55.9 0.0 22.3,51.8 1.1 28.3,37.3 0.0 25.0,37.7 0.0 25.8,38.8 0.0 26.9,net income distributable income dpu,-424.3 -3.8 -15.8,64.5 20.9 0.7,-61.4 -6.2 -7.3,-1.4 -2.6 -3.4,6.7 6.0 5.2,others,-9.6,-102.9,-67.0,-29.8,-41.2,profitability (%),trade and other receivables trade and other payables income tax paid investing cash flows,0.5 4.4 -6.2 -1172.7,0.4 -10.3 -2.0 -5.6,0.8 -19.4 -3.5 111.4,-0.5 0.0 -3.3 -80.0,-1.6 8.0 -1.1 -5.5,npi margin net income margin roa roe,77.4 154.6 5.8 9.7,71.5 234.8 8.4 14.3,77.0 96.5 3.3 5.4,77.9 91.6 3.2 5.3,77.7 87.4 3.3 5.6,ppe,0.0,-0.2,0.0,0.0,0.0,stability,capex on inv pty & others purchase of pty others financing cash flows others,-1.3 0.0 -1,171.5 987.6 419.1,-3.3 -92.6 90.4 -159.1 -2.5,-109.6 173.5 47.5 -287.1 42.9,-129.8 0.0 49.8 -164.3 6.9,-66.7 0.0 61.2 -240.9 6.6,gross debt/asset (%) total debt/investment prop int. coverage (x) int. & st debt coverage (x) cash flow int. coverage (x),39.4 40.3 1.5 0.2 3.7,38.0 39.7 3.8 0.8 4.2,37.1 37.9 3.9 0.2 4.2,37.4 37.9 4.1 0.2 5.9,37.1 37.4 4.3 0.2 6.0,borrowing costs,-76.1,-58.8,-49.1,-49.5,-50.6,per share data (sg cts),net borrowing proceeds distribution to unitholders net change in cash beginning cash balance forex,830.0 -185.4 21.3 31.2 0.0,112.5 -210.3 51.9 52.5 0.0,-73.9 -207.0 -18.9 104.4 0.0,79.8 -201.5 -21.8 85.5 0.0,16.7 -213.7 -11.7 63.7 0.0,epu dpu cfps nav sps,20.3 9.9 9 180.35 11,28.5 9.9 10 198.70 12,10.8 9.2 7 200.06 11,10.1 8.9 10 201.48 12,10.6 9.4 10 203.05 13,ending cash balance free cash flow,52.5 205.1,104.4 213.2,85.5 47.2,63.7 92.6,52.0 168.1,source: company, maybank ke,8 october 2012,page 6 of 10,suntec reit research offices,regional p k basu regional head, research & economics (65) 6432 1821 .sg wong chew hann, ca acting regional head of institutional research (603) 2297 8686 tham mun hon regional strategist (852) 2268 0630 .hk ong seng yeow regional products & planning (852) 2268 0644 .sg,economics suhaimi ilias chief economist singapore | malaysia (603) 2297 8682 suhaimi_ luz lorenzo economist philippines | indonesia (63) 2 849 8836 luz_,malaysia wong chew hann, ca head of research (603) 2297 8686 strategy construction & infrastructure desmond chng, aca (603) 2297 8680 banking - regional liaw thong jung (603) 2297 8688 oil & gas automotive shipping ong chee ting, ca (603) 2297 8678 plantations mohshin aziz (603) 2297 8692 aviation petrochem power yin shao yang, cpa (603) 2297 8916 gaming regional media power tan chi wei, cfa (603) 2297 8690 construction & infrastructure power wong wei sum, cfa (603) 2297 8679 property & reits lee yen ling (603) 2297 8691 building materials manufacturing technology lee cheng hooi head of retail technicals hong kong / china edward fung head of research (852) 2268 0632 .hk construction ivan cheung (852) 2268 0634 .hk property industrial ivan li (852) 2268 0641 .hk banking & finance jacqueline ko (852) 2268 0633 .hk consumer staples andy poon (852) 2268 0645 .hk telecom & equipment alex yeung (852) 2268 0636 .hk industrial india jigar shah head of research (91) 22 6623 2601 jigarkimeng.co.in oil & gas automobile cement anubhav gupta (91) 22 6623 2605 anubhavkimeng.co.in metal & mining capital goods property ganesh ram (91) 226623 2607 ganeshramkimeng.co.in telecom contractor 8 october 2012,singapore stephanie wong head of research (65) 6432 1451 .sg strategy small & mid caps gregory yap (65) 6432 1450 .sg technology & manufacturing telcos - regional wilson liew (65) 6432 1454 .sg hotel & resort property & construction james koh (65) 6432 1431 .sg logistics resources consumer small & mid caps yeak chee keong, cfa (65) 6433 5730 .sg healthcare offshore & marine alison fok (65) 6433 5745 .sg services s-chips bernard chin (65) 6433 5726 .sg transport (land, shipping & aviation) ong kian lin (65) 6432 1470 .sg reits / property wei bin (65) 6432 1455 .sg s-chips small & mid caps indonesia katarina setiawan head of research (62) 21 2557 1125 ksetiawanmaybank-ke.co.id consumer strategy telcos lucky ariesandi, cfa (62) 21 2557 1127 lariesandimaybank-ke.co.id base metals coal oil & gas rahmi marina (62) 21 2557 1128 rmarinamaybank-ke.co.id banking multifinance pandu anugrah (62) 21 2557 1137 panugrahmaybank-ke.co.id auto heavy equipment plantation toll road adi n. wicaksono (62) 21 2557 1130 anwicaksonomaybank-ke.co.id generalist anthony yunus (62) 21 2557 1134 ayunusmaybank-ke.co.id cement infrastructure property arwani pranadjaya (62) 21 2557 1129 apranadjayamaybank-ke.co.id technicals philippines luz lorenzo head of research (63) 2 849 8836 luz_ strategy laura dy-liacco (63) 2 849 8840 laura_ utilities conglomerates telcos lovell sarreal (63) 2 849 8841 lovell_ consumer media cement kenneth nerecina (63) 2 849 8839 kenneth_ conglomerates property ports/ logistics katherine tan (63) 2 849 8843 kat_ banks construction ramon adviento (63) 2 849 8842 ramon_ mining,thailand mayuree chowvikran head of research (66) 2658 6300 ext 1440 mayuree.cmaybank-ke.co.th strategy maria brenda sanchez lapiz co-head of research dir (66) 2257 0250 | (66) 2658 6300 ext 1399 maria.lmaybank-ke.co.th consumer/ big caps andrew stotz strategist (66) 2658 6300 ext 5091 andrewmaybank-ke.co.th suttatip peerasub (66) 2658 6300 ext 1430 suttatip.pmaybank-ke.co.th media commerce sutthichai kumworachai (66) 2658 6300 ext 1400 sutthichai.kmaybank-ke.co.th energy petrochem termporn tantivivat (66) 2658 6300 ext 1520 termporn.tmaybank-ke.co.th property woraphon wiroonsri (66) 2658 6300 ext 1560 woraphon.wmaybank-ke.co.th banking & finance jaroonpan wattanawong (66) 2658 6300 ext 1404 jaroonpan.wmaybank-ke.co.th transportation small cap. chatchai jindarat (66) 2658 6300 ext 1401 chatchai.jmaybank-ke.co.th electronics pongrat ratanatavanananda (66) 2658 6300 ext 1398 pongrat.rmaybank-ke.co.th services/ small caps vietnam michael kokalari,cfa head of research (84) 838 38 66 47 .vn strategy nguyen thi ngan tuyen (84) 844 55 58 88 x 8081 .vn food and beverage oil and gas ngo bich van (84) 844 55 58 88 x 8084 .vn banking trinh thi ngoc diep (84) 844 55 58 88 x 8242 .vn technololy utilities construction dang thi kim thoa (84) 844 55 58 88 x 8083 .vn consumer nguyen trung hoa +84 844 55 58 88 x 8088 .vn steel sugar resources page 7 of 10,suntec reit appendix i: terms for provision of report, disclaimers and disclosures disclaimers this research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. investors should note that values of such securities, if any, may fluctuate and that each securitys price or value may rise or fall. opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdictions stock exchange in the equity analysis. accordingly, investors returns may be less than the original sum invested. past performance is not necessarily a guide to future performance. this report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. the information contained herein has been