Suntec – UOBKH

Selling of Shares by Substantial Shareholder

75.1m shares offered by Lee Shau Kee. Substantial shareholder of Suntec REIT and chairman of Henderson Land Development, Lee Shau Kee has sold his entire stake of 5.27% or 75.1m shares of the trust for S$1.995 to S$2.04 each, generating S$153m. The share sale, managed by Citigroup, resulted in a dip in share price of 4.4% to S$1.97 yesterday. We believe that the sharp drop in share price reflects a shake-up of unitholders’ confidence in the stock.

Catalyst diluted by impact of deferred units. Key driver for the stock will come from rental reversions of its Suntec City and Park Mall offices. However, the impact will be diluted by its 207m deferred units issued at IPO, which will start in Jun 08 through six equal semi-annual payments of S$34.5m each. In addition, we do not foresee any significant asset enhancement programs this year as it is scheduled to complete its Suntec City enhancements by this end of this month. We also believe that any contribution from enhancement of Park Mall will
pale in comparison to Suntec City.

Maintain HOLD, fair value S$2.31. Previously, we have initiated the stock with HOLD when the share price was trading at S$2.09. With the more attractive current share price of S$1.97, investors who are more bullish on the stock may want to do a trading buy to take advantage of the share price weakness. However, we believe that the fundamentals remain, and this price weakness may be only short term, consequent to the share sale which has shaken unitholders’ confidence. Therefore, we maintain HOLD on the stock with a fair value of S$2.31.