CGS-CIMB Research is maintaining its “add” or “buy” call and target price of 85.4 cents on Lendlease Global REIT (LREIT). 

This is expected to give the counter a 27.4% upside from its 67 cent price on October 1, analysts Eing Kar Mei and Darren Ong say.

“We believe LREIT is a domestic recovery proxy following the Covid-19 outbreak, and we continue to like the income stability provided by the long lease structure of Sky Complex and annual rent escalation from >90% of its Net Lettable Area (NLA),” they elaborate.

LREIT is currently trading at – what Eing and Ong call “an attractive valuation” – of 6.4% FY21F dividend yield and 0.8x FY20 P/BV. By contrast the P/BV sector average is 0.9x while the average peaked at 1.1x FY20 P/BV pre-Covid-19.

Eing and Ong’s liking for counter follows its recent acquisition of a stake in Jem at a purchase consideration of $45 million. Under this, LREIT’s trustee RBC Investor Services Trust has entered into a share purchase agreement with Lendlease International to acquire a 5.0% stake in Lendlease Asian Retail Investment Fund 3 (LARIF3) Limited – a private fund.

See: Lendlease Global Commercial REIT acquires stake in Jem via Lendlease Asian Retail Investment Fund 3 for $45 mil

This acquisition translates to LREIT having a 3.75% stake in Jem which will be funded via internal funds and debt. With this, the counter’s proforma DPU would raise by 0.65% to 3.07 scts.

LARIF3 holds a 75% indirect interest in Jem which is an integrated office and retail development at Jurong Gateway. The mall has a NLA of 892,000 square feet, making it among Singapore’s largest suburban malls.

Of this, 65% of its NLA is occupied by retail spaces spread across its six levels while the remaining 25% that spreads across 12 levels has been fully leased to Singapore’s Ministry of National Development for 30 years.

Presently, the mall’s anchor tenants include Fairprice Xtra, Cathay Cineplex and Don Don Donki. It is looking to add famed names such as Koufu, Uniqlo, H&M, Courts and Ikea next year.

“Based on our observation, the mall is almost fully occupied. We expect Jem to perform in line with other strategically located suburban malls,” note Eing and Ong.

Aside from Jem, LREIT’s portfolio comprises: [email protected] in Singapore and Sky Complex in Milan, Italy.

[email protected] is a prime retail mall in the heart of Singapore’s Orchard Road belt which has an NLA of 288,277 sq ft. This gives it an appraised value of $1.01 billion. 

The Sky Complex at Milan meanwhile has three Grade A office buildings, giving it an NLA of 985,967 sq ft. Overall, the property has an appraised value of $434.6 million.

As at 12.16pm, shares of LREIT was up 1.5 cents or 2.24% to 68.5 cents.