Company Name: SUNTEC REAL ESTATE INV TRUST
| Research House: Maybank Kim Eng | Price Call: BUY | Target Price: 1.70 |
Analyst Ong Kian Lin of Maybank Kim Eng views the acquisition by DBS of a 30% equity stake in Marina Bay Financial Centre Tower 3 for $1.035 billion ($2,555 psf) as a positive for Suntec REIT as it removes the worrying possibility of equity fund raising if MBFC Twr 3 were to be injected into the REIT.
Ong says Suntec REIT can henceforth focus more on its organic Asset Enhancement Initiative on Suntec City. In addition, Suntec REIT has, over the weekend, also appointed the CEO of APM Property Management as its Deputy CEO with effect from Jan 1 2013.
DBS is the anchor tenant at MBFC Twr 3, occupying over 600,000 sq ft or 18 floors. Both parties also entered into a conditional put option agreement for DBS to take up Choicewide’s remaining 3.33% equity stake and its associated loan for an estimated aggregate price of $115 million. The remaining stake on MBFC Twr 3 (66.66%) is held by Hong Kong Land and Keppel Land.
“We think this shows Suntec REIT's commitment to making the Suntec City revamp a success,” says Ong.
Maybank-Kim Eng is maintaining a “buy” rating for Suntec REIT. Its target price of $1.70 is unchanged for now, although “we believe there is upside potential after FY12 results as pre-commitments for phase 1 Suntec City Mall (complete by 2Q12) are likely to be secured above Suntec’s post-AEI target of $12.59 psf/mth.”
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