Excerpts from DBS Group Research report
Sabana REIT (SGX: M1GU)
- Sabana Reit released a strong set of results driven by positive rental reversions of 17.4% and improvement in portfolio occupancy
- New 10-year master lease secured for 30/32 Tuas Ave 8 with a tenant from the healthcare sector
- AEI plans at 1 Tuas Ave 4 have commenced and are expected to be completed in 2H23
Maintain HOLD with unchanged TP of S$0.48
Sabana Reit NTP continues to be the star in the portfolio
The completion of NTP+ has added c.S$3.5m to Sabana REIT’s revenue and boosted occupancies and rental reversions at the REIT’s “Crown Jewel”.
NTP was the main driver of positive rental reversions and uplifted revaluations for the portfolio. Hence, we are forecasting a DPU CAGR of c.7% over the next three years, mainly driven by NTP.
Targeted asset enhancements to drive growth
Having successfully completed five AEIs in the past year that led to portfolio revaluation gains and earnings growth, Sabana Reit will continue to focus its efforts on more portfolio rejuvenation initiatives.
With AEIs at 1 Tuas Avenue 4 expected to commence soon, we believe that more clarity on such plans and firm pre-commitments for the property will drive an earnings upside.
Exciting growth plans ahead but require more clarity
As SSREIT continues to focus on rejuvenating its portfolio, it is ready to embark on acquisitions in the near to medium term. Although Sabana Reit’s capital management fundamentals are conducive for acquisitions, stiff competition for quality industrial and logistics assets could pose a hurdle. As such, we hope to see more clarity on SSREIT’s ability to acquire accretively in the coming years to achieve their targeted S$1.0bn AUM.
Maintain TP of S$0.48, maintain HOLD based on DCF with a WACC of 7.0%. Our TP represents an implied FY22F yield of 7.1%. We have assumed uplifted earnings in the next three years, driven by the recent completion of NTP+ and other AEIs.