Broker's take: DBS maintains 'buy' on Suntec Reit with target price of S$2.30

ANALYSTS from DBS Group Research have maintained a "buy" call on Suntec Reit with a target price of S$2.30.

The brokers acknowledged that while they missed Suntec's 30 per cent share price rally in 2017, they believe that the rallystill has legs, citing confidence in Suntec's CEO Chan Kong Leong's ability to engineer a turnaround at Suntec Mall.

With a multi-year upturn in Singapore office rents on the horizon, Reits with office exposure, like Suntec, should trade above book value, they added.

If there is an attempt by the Reit sponsors, ARA Asset Management and its partners, to take Suntec Reit private, the analysts believe the "takeover risk should result in a firm Suntec share price going forward".

The brokers were also positive on closing the rental gap between Suntec Mall and other malls in Singapore, with the former's rental charges being lower than that of other suburban malls.

"We believe as Suntec remixes its tenant mix ... the resultant higher foot traffic, tenant sales and improving rents should act as re-rating catalysts," the brokers added.

However, DBS identified a downturn in the office market and management's inability to revitalise Suntec Mall as key risks to their valuation.

As at 10am, Suntec Reit units were trading S$0.01 or 0.5 per cent down at S$2.14.