Suntec – Phillip

1QFY10 Results

• 1QFY10 of $62.5 million, net property income of $47.8 million, distributable income of $45.4 million

• 1QFY10 DPU of 2.513 cents

• Rebound in office reversionary rent

• Maintain hold recommendation with fair value of $1.34

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Results within expectations

Suntec REIT recorded 1Q10 revenue of $62.5 million (-3.8% y-y, +1.1% q-q), net property income of $47.8 million (-2.7% y-y, +1.3% q-q) and distributable income of $45.4 million (-2.1% y-y, -5.1% q-q). 1Q10 DPU was 2.513 cents (-13.9% y-y, -13.0% q-q). The decrease in DPU was mainly attributed to the larger share base in 1Q10 from the issuance of the deferred units. Although there was a general drop from a year ago, however the revenue trends showed that things have stabilized over the last 3 quarters. The office portfolio is showing signs of improvement. Office occupancy has inched up slightly to 96.9% and reversionary rent has also increased from $7.11 achieved in 4Q09 to $7.34 in 1Q10. For the retail portfolio, revenue contribution remained stable, but occupancy fell slightly to 97.2%. On the overall, the office portfolio contributed 47% to total revenue while the retail portfolio accounted for the rest at 53%.

Suntec REIT has total debt of $1.752 billion. Gearing is 33.4%. $532.5 million is due in 2011.

We are raising our revenue estimates as Suntec REIT portfolio is showing better resiliency than we had previously thought. Both Park Mall and Chijmes had achieved 100% occupancy for the past 3 quarters running. Previously we were concerned on the performance of Suntec City Office Tower, but the latest 1Q10 results showed that occupancy has improved and overall revenue trend shows stabilization. Our attention is now shifted to Suntec City Mall, which has registered slight drop in occupancy. Our estimates revisions reflect 1-3% increase in revenue and 2-7% increase in DPU for forecast years 2010E-2012E. We raised our fair value from $1.21 to $1.34 and maintain our Hold recommendation.