Lendlease Global Commercial REIT – High rental reversion and rental upside from Sky Complex February 5, 2024 112

PSR Recommendation: BUY Status: Maintained
Last Close Price: 0.58 Target Price: 0.83
  • Gross revenue increased by 17.9% to S$9mn with the 2-year supplementary rental from Building 3 of Sky Complex and form 55% of our FY24e forecast.
  • NPI increased 22.2% YoY while DPU slid 14.5% YoY to 2.1 cents, and were 54%/52% of our FY24e estimates. High rental reversion was sustained with 313@somerset at c.20%, and Jem provided a stable contribution at c.10%.
  • We reiterate our BUY recommendation with lower DDM-TP of S$0.83 and FY24e-25e DPU forecast of 4.16-4.59 Singapore cents. Erosion of DPU brought by higher-for-longer interest rates will still be apparent. We expect FY24e earnings will be supported by strong rental reversion.



The Positives

+  Resilient rental reversion of 15.7%, with 313@somerset contributing c.20%, and Jem delivering stable support of c.10%. Due to the lingering effects of COVID-19 base rents, we expect a rental reversion in the high teens for 313@somerset and in the low teens for Jem in 2025, as 20.3% of the lease by GRI is set to expire.


+ Stable operating metrics. Tenant sales continue to trend above pre-COVID levels and increased 0.6% YoY in 1H24. F&B, entertainment, and necessities outperformed. Despite lower contributions from GTO, we expect sales to benefit the top line with the influx of Chinese tourists, facilitated by the 30-day visa-free policy.


The Negative

Borrowing cost inched up. There was no indication of a near-term reversal in the interest rate trajectory. LREIT having hedged 61% of its borrowings, will not experience much benefit from a potential interest rate cut in the future. With the implementation of the new rate, the expected interest rate for FY24e is c.3.5% (1H24: 3.37%).

Notify of
Inline Feedbacks
View all comments

About the author

Profile photo of Liu Miaomiao

Liu Miaomiao
Liu Miaomiao

Miaomiao mainly covers the Singapore REITs sector and graduated from Singapore Management University with a Bachelor’s degree in Business Management.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!