Event – PT revisions downwards by average -1.8%
We have moved the spot risk free in our DCF model to 2.9% for yr0-10, from 2.7% following recent interest movements. Our terminal rate (yr10+) is unchanged at 3.6%.

Impact – Downgrade CCT and SUN

This move lifts our price targets downwards by -1.8% on average. Due to recent price movements we have moved CCT from a Neutral 2 to a Reduce 2 and SUN from a Buy 1 to a Neutral 1. We believe the office rental uptrend has been largely priced in and it is increasingly difficult for these REITs to make yield-accretive acquisitions domestically.

Our key picks among the SREITs are 1. Mapletree (acquisition upside potential not priced in) 2. Cambridge (re-rating potential & possible acquisition upside) =3. Domestic retail – FCT and CMT (organic growth likely to continue to exceed expectations). We maintain a Buy 2 on KREIT due to the strong expected rental reversions which we believe have not been priced in.

The sector continues to offer relatively attractive pricing currently, with a 4.3% CY’07 yield, 6.0% ’07-12 DPU growth, and 7.5% upside to our price target. We recognise the expected S$5bn+ of capital raising in 2007 ($945m YTD) is likely to provide a moderate headwind.