Analysts from CGS-CIMB Research and RHB Group Research are positive on <a href="https://www.theedgesingapore.com/tags/suntec-real-estate-investment-trust-suntec-reit" target="_blank">Suntec REIT</a>’s move to divest its office strata units and acquisition of a London Grade A office development.

The REIT announced the divestment and acquisition on <a href="https://www.theedgesingapore.com/news/reits/suntec-reit-divests-suntec-city-office-strata-units-197-mil-acquires-minster-building" target="_blank">June 30</a>.

On this, the analysts have maintained their “add” and “buy” calls.

CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei and also upped their target price estimate to $1.79 from $1.76 previously, while RHB analyst Vijay Natarajan have increased his target price to $1.76 from $1.72.

To Lock and Eing, the transactions are in line with Suntec REIT’s active capital management and recycling strategies.

To date, the REIT has divested its property on 9 Penang Road and its office strata space and used the proceeds to invest in higher yielding properties such as The Minster Building in London.

The yield on 9 Penang Road and the office spaces have yields of 3.1% and 3.3% respectively, while the net yield on The Minster Building is 4.5%, note the analysts in a July 1 report.

Following the move, Lock and Eing have increased their distribution per unit (DPU) estimates by 1.3% to 6.1% to account for both divestments and the acquisition.

A faster-than-expected recovery of the REIT’s retail and convention business is expected to be a catalyst for the REIT’s share price, while higher-than-estimated rental waivers are downside risks to the counter, say the CGS-CIMB analysts.

See also: <a href="https://www.theedgesingapore.com/news/reits/suntec-reit-divests-suntec-city-office-strata-units-197-mil-acquires-minster-building" target="_blank">Suntec REIT divests Suntec City office strata units for $197 mil; acquires The Minster Building in London for $667.2 mil</a>

To RHB’s Natarajan, Suntec REIT’s latest move has reaffirmed its “value-unlocking strategy”.

“The healthy premium to latest valuation achieved for its Singapore office assets emphasises to investors the continued positive outlook on the office sector post-Covid-19, and also highlights the undervalued nature of its share price, trading at c.30% discount to book value,” he writes in a July 1 report.

For more stories about where the money flows, <a href="https://www.theedgesingapore.com/section/capital" target="_blank">click here</a> for our Capital section

As at 3.04pm, units in Suntec REIT are trading 1 cent higher or 0.7% up at $1.47, or 0.7 times P/B, according to RHB’s estimates.

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