Suntec – Lim and Tan

• Investors are expected to welcome Suntec’s $410 mln asset-enhancement initiative (AEI), largely because it has no plans to tap existing unit-holders for fresh funds.

• The 4-phase AEI, starting in 2012 through 2015, is to be largely funded by the $177 mln proceeds from the sale of Chjmes and bank borrowings.

• While only time will tell whether CEO Yeo See Kiat’s optimism will pan out (rentals to rise to $12.59 psf from current $10.10 ), we believe investors accept the need for some kind of makeover for the 17 year-old “institution”, especially since:

(a) Suntec Reit raised its stake in the Convention Centre (Suntec Singapore) to >60%.

(b) minimal impact on the distribution to unitholders.

(c) completion of Downtown Line by the time the proposed AEI is completed (Suntec Citry is already being served by the Circle Line).

• Indeed, the expected 14% increase in retail space (by 125,000 sf to 980,000 sf) will come from the conversion of the first 2 levels of Suntec Singapore.

• We believe Suntec Reit merits a BUY.

• Based on the latest annualized DPU of 10.05 cents, yield is 8.1%.