Suntec REIT: Australia Office Portfolio to Weigh on 2024 Earnings

We retain our fair value estimate of SGD 1.38 per unit after Suntec REIT’s broadly in line first-quarter 2024 business update. Net property income was slightly below our expectation due to the stronger Singapore dollar against the Australian dollar, seasonally weaker convention business, and lower net property income margin. However, distribution per unit, or DPU, was still in line with our forecast due to higher joint venture income. After updating our exchange rate and debt assumptions, we lift 2024-26 DPU estimates by 1%-3%. Based on the current price, the trust trades at a 2024 distribution yield of 5.6% and is undervalued. However, we think the trust’s near-term earnings will be weighed down by vacancies in its Australia portfolio and high borrowing costs. For Singapore REITs, our top pick is Keppel REIT, which trades at a more attractive distribution yield of 6.8%.