CGS International
July 29, 2025
Suntec REIT Shines Domestically but Faces Overseas Headwinds: In-Depth Analysis, Peer Comparison, and ESG Insights
Overview: Suntec REIT Delivers Solid 1H25 Results Amid External Challenges
Suntec REIT (SUN) reported a robust performance for the first half of 2025, with a strong showing in its Singapore-based assets offsetting pressures in its overseas portfolio. The REIT delivered a 4.6% year-on-year increase in distributable income, reaching S\$92.8 million and distributing 3.155 Singapore cents per unit—up 3.7% year-on-year and in line with expectations at 50.3% of the full-year forecast. However, the outlook remains cautious as challenging market conditions in Australia and the UK are expected to weigh on near-term catalysts.
Key Financial Highlights and Performance Metrics
- 1H25 Distributable Profit: S\$92.8 million (+4.6% YoY)
- Distribution Per Unit (DPU): 3.155 Scts (+3.7% YoY)
- Aggregate Leverage: 41.1% as of end-1H25
- All-in Financing Cost: 3.82%, down 14 basis points quarter-on-quarter
- Fixed Rate Borrowings: 65% hedged
- Market Capitalization: S\$3,496 million
- Free Float: 92.0%
- Major Shareholders: The Straits Trading Company (8.0%), Blackrock (5.0%)
| Financial Summary |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Gross Property Revenue (S\$m) |
462.7 |
463.6 |
466.6 |
477.7 |
492.0 |
| Net Property Income (S\$m) |
313.2 |
310.8 |
316.8 |
323.2 |
332.0 |
| Net Profit (S\$m) |
231.6 |
139.4 |
181.2 |
194.6 |
206.2 |
| Distributable Profit (S\$m) |
206.8 |
180.9 |
185.1 |
197.8 |
208.6 |
| DPS (S\$) |
0.071 |
0.062 |
0.063 |
0.067 |
0.070 |
| Dividend Yield |
6.00% |
5.20% |
5.27% |
5.59% |
5.86% |
| Asset Leverage |
38.9% |
34.2% |
34.0% |
34.0% |
33.9% |
Singapore Portfolio: Strong Office and Retail Performance
Singapore Office Segment
- Committed Occupancy: 99% as of end-1H25
- Rental Reversion: Suntec Office +6.9% in 1H25 (2Q: +8.3%)
- MBFC Towers 1 & 2 and One Raffles Quay: +13% rental reversion in 1H25 (2Q: +16.2%)
- 206,300 sq ft of office space renewed in 1H25 (79% renewal leases)
- Management expects FY25F rental reversions to be similar to 1H25 levels
Suntec Mall and Convention
- Mall Occupancy: 98% as of end-1H25
- Rent Reversion: +18% YoY
- Shopper Traffic and Tenant Sales: Both down 2% YoY in 1H25
- Management expects FY25F rental reversions to be lower than 1H25
- Suntec Convention NPI surged 64.4% YoY to S\$7.4m in 1H25, driven by a rebound in large- and mid-scale events and improved margins from higher-yielding MICE events and lower utilities rates
Overseas Portfolio: Challenges in Australia and the UK
Australia Office
- Committed Occupancy: 88.6% in 1H25 (down quarter-on-quarter)
- Notably weak occupancy at 55 Currie St (52.4% take-up)
- Leasing environment in Adelaide remains difficult due to high vacancies, though marginally better than 1Q25
UK Office
- Portfolio Occupancy: 92.2% in 1H25
Peer Comparison: How Suntec REIT Stacks Up
Office REITs
| REIT |
Ticker |
Price (S\$) |
Target Price (S\$) |
Market Cap (US\$m) |
Leverage |
P/BV |
Dividend Yield FY25F |
Dividend Yield FY26F |
Dividend Yield FY27F |
| Keppel REIT |
KREIT SP |
0.94 |
1.08 |
2,831 |
42.1% |
0.75 |
5.8% |
6.1% |
6.3% |
| OUE REIT |
OUEREIT SP |
0.31 |
0.33 |
1,332 |
40.3% |
0.54 |
6.4% |
7.1% |
7.4% |
| Suntec REIT |
SUN SP |
1.19 |
1.26 |
2,728 |
41.1% |
0.60 |
5.3% |
5.6% |
5.9% |
Other Sectors (Simple Averages)
- Hospitality REITs: Dividend yield 5.9%–6.5%
- Industrial REITs: Dividend yield 6.7%–6.9%
- Retail REITs: Dividend yield 6.1%–6.4%
- Overseas-centric REITs: Higher yields, but greater volatility
- Healthcare REITs: Lower yields (3.8%–4.3%)
ESG (Environmental, Social, Governance) Performance and Initiatives
- LSEG ESG Combined Score: C+ (FY23)
- Environmental: B-
- Social: C
- Governance: C
- ESG Controversies Score: A+
- GRESB 2023: Achieved highest 5-star rating and ‘A’ for disclosure
- Carbon Neutral Goals: Targeting carbon neutrality for Australia & UK assets and net zero for wholly-owned assets by 2030F, and for the entire portfolio (including Scope 3) by 2050F
- Current ESG Milestones: 70% of debt as green/sustainability-linked loans as of June 2024; WELL Platinum Certification for 477 Collins St and Nova Properties; 100% renewable energy at several properties
- Social initiatives include toy donation drives and support for education through the Lee Kuan Yew Centennial Fund
Notably, Suntec REIT ranks 77th out of 104 Singapore companies (23rd among 26 Singapore real estate peers) in the latest LSEG ESG data. While it scores well in environmental and social pillars, governance and environmental innovation remain areas for improvement. No ESG premium or discount is currently applied in valuations, but enhanced governance could potentially boost future scores and investor appeal.
Balance Sheet and Key Ratios
| Key Ratios |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Net Property Income Margin |
67.7% |
67.0% |
67.9% |
67.7% |
67.5% |
| DPS Growth |
(19.7%) |
(13.2%) |
1.2% |
6.1% |
4.8% |
| Gross Interest Cover |
1.39 |
1.36 |
1.42 |
1.45 |
1.50 |
| Net Dividend Payout Ratio |
89% |
130% |
102% |
102% |
101% |
| Current Ratio |
0.56 |
0.31 |
0.39 |
0.49 |
0.59 |
| Rental Rate (S\$psf) |
9.6 |
9.9 |
10.1 |
10.3 |
10.5 |
| Occupancy |
1.0 |
1.0 |
0.9 |
0.9 |
0.9 |
Investment Outlook: Hold Rating Maintained Amid Uncertain Global Backdrop
CGS International maintains a Hold rating on Suntec REIT with an unchanged DDM-based target price of S\$1.26. Near-term upside remains limited due to persistent challenges in the Australian and UK commercial real estate markets, which could delay recovery in overseas property vacancies. Key upside risks include faster-than-expected balance sheet strengthening, capital recycling, lower funding costs, and quicker backfilling of overseas occupancies. Conversely, higher-than-expected interest rates or a prolonged weak macroeconomic environment could dampen demand and pose downside risks.
Conclusion: Suntec REIT — Domestically Resilient, Internationally Cautious
Suntec REIT remains a resilient player in Singapore’s office and retail sectors, with strong occupancy, positive rental reversions, and a robust track record in ESG. However, overseas headwinds and high leverage temper the near-term outlook. Investors should keep a close watch on overseas market developments and Suntec’s ongoing ESG and capital management initiatives for potential future catalysts.
