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Suntec REIT
Improved performance
■ 1Q22 distributable income of S$68.7m was slightly below our expectations, at 22% of our FY22F forecast.
■ Office performance boosted by new contributions; retail reversions stabilising.
■ Downgrade to Hold from Add with an unchanged TP of S$1.79.
1Q22 business update
SUN reported a 1Q22 gross revenue of S$99.2m (+13.9% yoy), while distributable income to unitholders rose a higher 18.2% yoy to S$68.7m with the inclusion of S$5.8m of capital
distribution. 1Q22 DPU of 2.391 Scts, up 16.9% yoy, was slightly below our projections at 22% of our FY22F forecast. The better operating performance was due to contributions from The Minster in the UK as well as higher income from Suntec Mall and Convention and 21 Harris St, partly offset by lower occupancy at 177 Pacific Highway and weaker A$. As at end-1Q, office/retail’s committed occupancy stood at 96.7%/95.2%. SUN’s gearing stood at 43.3%, while all-in financing cost declined qoq to 2.31%. SUN aims to continue to strengthen its balance sheet through active capital management. About 60% of its A$ income was hedged as at 1Q22.
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iFAST Corporation Ltd
Near-term pain, long-term gain
■ Although net inflows remained positive, sequential earnings could be challenged by volatile markets and elevated opex (for bank, ePension).
■ We factor in more substantial ePension contributions from FY23F onwards as management sees clearer opex visibility amid the implementation phase.
■ Reiterate Add as we look past near-term headwinds due to persistent market volatility and towards c.50-60% EPS growth in FY23-24F (largely from HK).
1Q22 earnings miss due to poor market conditions
iFAST recorded PATMI of S$5.7m in 1Q22 (-20% qoq, -35% yoy), 30%/35% below our/consensus estimates. The miss was primarily due to softer-than-expected revenue growth on the back of poor market conditions. Although net revenue held steady yoy, higher opex (+10% yoy) and taxes (due to absence of carry-forward tax losses) in 1Q22 led to the weaker net profit showing. 1Q22 PATMI formed 18%/16% of our/consensus FY22F forecasts. iFAST declared an interim DPS of 1.0Scts in 1Q22 (1Q21: 1.0 Scts) – we cut FY22F DPS to 4.8Scts (58% payout, FY21: 4.8Scts, 43% payout) as we factor in sustained market volatility in the near term and the corresponding risk-off sentiment.
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Suntec REIT (SUN SP)
1Q22: Yield Augmented By Capital Distributions In 2022 And 2023
Occupancy for the Singapore office portfolio is on an uptrend and improved 0.3ppt qoq to 97.8% in 1Q22. Rent reversion at Suntec City Mall was flat, a reversal from a negative reversion of 11.8% in 4Q21. Outlook for the office market has brightened in Singapore and London and stabilised in Australia. Management intends to maintain capital distribution at S$5.8m for eight consecutive quarters. Downgrade to HOLD as share
price has already rallied 22% over the past six months. Target price: S$1.90.
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Keppel Corporation -1Q22 see drag from Urban Development
- 1Q22 revenue of $2.1bn was below of our forecasts, at 23.5% of FY22e. The drag came from the Urban Development business.
- The update mentioned 1Q22 net profit was higher YoY, with improved performance from all its business segments except Urban Development. Keppel Offshore & Marine’s (KOM) recorded a significantly reduced net loss and was EBITDA positive.
- Significant progress made on advancing the sale of KOM legacy rigs and associated receivables, working towards definitive agreements by 30 April 2022.
- Maintain BUY with unchanged SOTP TP of S$7.07. We valued the Group based on the four new segments unveiled during Vision 2030 to better reflect the Group’s reporting segments going forward. Our TP translates to about 1.0x FY22e book value, in-line with its 5-year average. Catalysts expected from a successful resolution of its O&M unit.
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Suntec REIT (SUN SP)
Riding Reopening Tailwinds
Strong 1Q22, raising our forecasts, TP
1Q22 DPU rose 17% YoY and 5% QoQ, driven by improvement at Suntec City, contribution from London’s Minister Building, and resumption of capital distributions (c.SGD0.2cts per quarter to 4Q23). Occupancy improved with demand recovery, and we expect fundamentals for SUN’s Singapore office and retail assets to strengthen further following easing of restrictions, reopened borders, and rising rents. We raise our FY22-24E DPUs by 5-8% on stronger-than-expected results, and visibility on capital distributions.
With 15% potential total return to our higher SGD2.00 DDM-based TP (COE: 6.9%, LTG: 2.0%), reiterate BUY.
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Sheng Siong ($1.53, unchanged) reported that for its 1Q22 business update, revenue increased by 6.0% year-on-year (‘yoy’) to S$358.0 million.
Comparable same store sales increased by 4.7% yoy in Singapore and 1.0% yoy in China respectively. New stores contributed 0.3% increment to the total revenue increase.
Sheng Siong is capitalized at S$2.3bln and currently trades at 19.9x forward PE and 5.5x PB, with a 4.1% yield while consensus target stands at S$1.59, representing a 4% upside. Despite good results, we think that the rising inflation will weigh on profitability in the short term due to higher input costs, while the reopening of Singapore allows for outdoor
‘revenge spending’ at least for the near term. Valuations are also slightly on the higher side at 19.9x PE and 5.5x PB despite a seemingly high ROE of 34%. As such, we have a HOLD recommendation on Sheng Siong.
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