Suntec Reit

From TA point of view, it is on a downtrend mode chart patterns.
It would be nice to wait for it to stabilize before taking further action.

Personally, I think it might be ok to monitor to see if 1.61 price level is it managed to hold up well.
If 1.61/1.60  cannot hold then next price level may go down to 1.57 with extension to 1.50.

At 1.50, yield is about 6.6% that would be quite attractive and also is trading at a good discount in terms of its NAV of about $2.1.

Not a call to buy or sell .

Please do your own due diligence.

To ride on the return to better profitability going forward......Let me also do a comparison against Suntec REIT to see how Suntec REIT pits against both CapitaMall Trust and Starhill Global REIT for the past 11 years. Then there is also Mapletree Commercial Trust also another touted good performer which is also a retail-office hybrid landlord to compare against. I am getting quite excited here.

I have tabulated Suntec REIT and Mapletree Commercial Trust's (MCT) growth performance to compare against Starhill Global REIT and CapitaMall Trust (CMT). However, for MCT, it was only listed from April 2011 onwards. As such, I have taken only the period from 2012 to 2017, a five year period of growth for MCT to compare against the rest.

Net property income CAGR for 11 years (5 years for MCT)
CMT = 7.42%
Starhill Global = 9.2%
Suntec REIT = 6.23%
MCT = 18.7%

Distributable income CAGR for 11 years (5 years for MCT)
CMT = 8.02%
Starhill Global = 7.2%
Suntec REIT = 9.71%
MCT = 25.5%

Value of investment properties CAGR for 11 years (5 years for MCT)
CMT = 6.1%
Starhill Global = 7.29%
Suntec REIT = 9.87%
MCT = 16.56%

The current gearings for these four REITs are quite close hovering around 35% plus minus 1 to 2 % points. Thus, they are financially geared about similar levels currently after rendering their respective historical CAGR growths in the past period considered.

If we ignore the duration of period considered, clearly the winner here is Mapletree Commercial Trust (MCT). But, it would not be a fair comparison since the period considered for MCT is only most recent 5 years which the retail and office markets long way back and recent 5 years may have seen changes thus affecting the growth rates at different periods in time. The big question is whether going forward can MCT continue to grow at current CAGR? This is because the property asset size of MCT is also by no means smaller than some of the rest in this comparison. Thus, to give it some fairness even if the period of growth considered is only recent 5 years, it really has made impressive double digits CAGRs on it's various metrics on a large property asset base.

Suntec REIT seems also quite good in terms of growing it's distributable income and value of investment properties at close to 10% CAGR over the past 11 years winning over Starhill Global REIT and CMT by a large margin. The only thing is that the net property income CAGR for Suntec REIT loses out to the latter two despite having grown faster in it's distributable income and value of investment properties. Perhaps, it is worth investigating further for interest why Suntec REIT did not grow it's net property income at higher CAGR over the past 11 years? Is it a matter of difficulty in keeping property expenses low? Is it the gross revenue are not growing as fast due to generally lower rental income rates on it's properties over the years?

In conclusion, I see Mapletree Commercial Trust as experiencing strong growths in net property income, distributable income and the value of their investment properties even though their growth considered is only most recent 5 years. If it can continue at current or close to current CAGR for these various metrics over next few years, it may really become a clear winner in this segment of retail-office landlord space. Starhill Global REIT may not be a stark winner against it's peers in this comparison. However, it is definitely also not a loser trailing behind it's peers in terms of growth performance.

My picks as follows according to their growth performance.
1st = MCT
2nd= Suntec REIT
3rd (tie up) = Starhill Global REIT and CMT

Reasoning as follows: I like MCT for it's current high growth rate. I look forward to it's future developments whether it can continue to maintain the current high growth rate from it's future growth strategies. If it can do so, this is really one of the best performer in this retail-office landlord space.

Suntec REIT I like how it has rewarded unitholders well over time in terms of it's high growth rate in distributable income and growing it's property asset base through itself and also forming joint ventures with others. The only thing I would wish they could improve upon is to grow their net property income in step with their overall growth. If I am considering Suntec REIT, I will watch their future net property income closely for signs that they are growing their rental income on their properties well and also managing their property expenses more efficiently.

Starhill Global and CMT are lagging slightly behind the above two picks. If their growth going forward can be more exciting with their ongoing growth strategies, then I will upgrade my opinion on either or both of them to be on par or higher than MCT or Suntec REIT.

These are the unit price, NAV per unit and distribution yield for these four comparisons currently.

Unit price vs (NAV per unit)
MCT = $1.57 vs ($1.37)
Suntec REIT = $1.69 vs ($2.119)
Starhill Global REIT = $0.675 vs ($0.91)
CMT = $2.07 vs ($1.92)

Distribution yield
MCT = 5.77% (annualised based on 9M results)
Suntec REIT = 5.21%
Starhill Global REIT = 5.99% (annualised based on 1H results)
CMT = 5.64%

In terms of trading at cheap valuations, this is the ranking I give based on unit price vs NAV per unit and also their current distribution yield.

1st = Starhill Global REIT
2nd (tie up) = Suntec REIT and CMT
3rd = MCT

This proves the point that good things do not come cheap. MCT may rank as best growth performer in it's various important metrics considered earlier, it also comes with a not so cheap price tag. But, a thing worth considering is that if MCT can continue to grow at current growth rates, perhaps at an annualised distribution yield of 5.77% is still worth some nibbling.

If a bear market should come soon, at least one will now know which are the strong growth performers that can be snapped up at a rare discounted price. There are certainly more REITs to compare against these few whether in similar retail-office landlord sector or other REIT sectors and I am sure this is not the end to the comparison in this REIT universe as one may just be surprised that there maybe even better performers out there than MCT.

PS: I will hope a bear market comes soon and then shopping for REITs will be a real bargain as discounts will be everywhere even for excellent REITs. My target buy-in prices will be the lower the better for these few REITs mentioned. {

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