Key Investment Merits
Organic growth to support valuation and DPU:
Potential Inorganic growth opportunities: After capping gearing at 45%, LREIT is estimated to have a debt headroom of c.$207m which allows for piecemeal acquisitions of a small stake in PLQ Mall or Parkway Parade (PP) as Singapore remains its focus. We believe LREIT can acquire c.6.2% of PLQ Mall or c.14.7% of PP, assuming the cap rate for PLQ Mall and PP is c.4.5%.
Attractive Valuation: Based on the 2% terminal growth rate, we reinitiate with a BUY recommendation, and the DDM-backed target price is $0.91. We increased the COE to 7.6% to reflect the higher interest rates. We expect FY23-24e DPUs of $4.63 – 4.78 cents.
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