Suntec REIT in royal mess up!
What a royal mess up! It has been a long time since my last coverage on Suntec REIT and it appears to me that this counter had plunged into some sort of crisis. Revenue from its office segment declined for five consecutive quarters on year-on-year basis since end 2017. That dismal showing saw former CEO Chan Kok Leong throwing in the towel in October 2018.
How did the former CEO of Suntec REIT mess up is beyond my understanding. From the data, it was shown that since 2016, the committed occupancy for Suntec REIT’ Singapore office rose from 98% to 99.5%. This was an impressive performance against the average overall Central Business District Grade A occupancy of 92%. But in every quarter of FY2018, revenue from office declined on year-on-year basis. This can only mean one thing – that the office rentals had been renewed at lower rates, resulting in revenue destruction for Suntec REIT in FY2018.
Amid the current bull run across the sector-wide S-REIT, the ailing performance of Suntec REIT stands out like a sore thumb. The laggard performance of this venerable S-REIT is actually legitimate due to its lacklustre operational performance. Despite the struggle, DPU remained resilient, dropping only 0.2% to 9.988 cents for FY2018.
However, I have always urged investors not to judge an S-REIT purely on the DPU history. It is important to assess the business fundamentals before parting away your hard-earned monies. In this article, I will share my views on the outlook for Suntec REIT in FY2019.
Will Suntec REIT see daylight?
Whether the former CEO Chan Kok Leong was forced to resign or simply left to pursue his own interest is subject to speculation. But given the abrupt nature of his departure, his resignation hardly seems like long-term succession planning.
Chan Kok Leong was only appointed as CEO of Suntec REIT in 2017, so maybe he should have been given a bit more time to revive the business performance. Perhaps the board of directors had [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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