Suntec REIT Earnings: Trust to Benefit From Proposed Regulatory Changes to Aggregate Leverage

Suntec REIT’s first-half 2024 distribution per unit fell 12.5% year on year to SGD 0.03, making up 49.3% of our full-year estimate. Higher financing costs drove the decline in DPU, along with the absence of capital distribution, and a lower contribution from 55 Currie Street and The Minster Building, partly offset by better performances from its Singapore assets and Nova properties. Given the mostly in-line results, we keep our estimates largely unchanged and retain our fair value estimate of SGD 1.38 per unit. The trust is currently undervalued and trades at a 2024 distribution yield of 5.2%. In our view, the proposed change in leverage requirement by the Monetary Authority of Singapore and the interest rate pivot in the near future will alleviate some deleveraging concerns for the trust.