Suntec REIT
I would like to discuss my recent successful investing thesis in Suntec. It results in a profit of 101.76% including dividends, whereby the purchase price is $1.10 on 13 December
2011 and selling price is $1.795 on 4 April 2017.
How Did I Find This Stock?
No one can do the market timing successfully. I was lucky to be asked by my friend to give my opinion about Suntec REIT to him. The price was attractive at that time. I figured that there is enough margin of safety.
About Suntec REIT
It is real estate investment trust with good track record of
owning properties with unique location or characteristics.
Suntec REIT will purchase typically commercial skyscrapers with or without shopping centres. The purchase of these properties are likely to be financed by debt, bank loans, and if any, new issuance of shares.
It is currently managed by a SGX-listed company, ARA. ARA charges Suntec REIT for the management cost, which will be paid by the Suntec's stocks which are given by Suntec REIT. To pay down the debt/bank loans and interest cost, net profit, that is rental collection minus all expenses, are used. For given such strategic locations, Suntec REIT is able to charge higher rental price.
Straits Trading also owns significant stake in Suntec REIT.
Rationale of
Investing in Suntec REIT stock
Before I invested Suntec REIT, its then ownership of the properties are Suntec City, 1/3 of Marina Bay Financial Centre, Park Mall, and Chijimes. These are highly strategic locations where there are a lot of human traffic. I believe that $1.10 is mispriced for the Suntec REIT’s ownership of these properties. It was a screaming buy in front of my eyes.
Happenings during the Holding Period
Before I invested Suntec REIT, its then ownership of the properties are Suntec City, 1/3 of Marina Bay Financial Centre, Park Mall, and Chijimes. These are highly strategic locations where there are a lot of human traffic. I believe that $1.10 is mispriced for the Suntec REIT’s ownership of these properties. It was a screaming buy in front of my eyes.
Happenings during the Holding Period
Suntec City was renovated thoroughly to have more floor spaces and better shopping and meeting room layout. It also started to use point scoring system, somewhat similar to Capitaland.
The price per psf had increased. As a result, the rental income collection from post-renovaton Suntec City has been increased too. There are a lot of new retaliers from foreign countries, which Singaporeans have not seen before elsewhere in Singapore.
It is unprecedented that Suntec REIT started to buy two
Australian commercial buildings in Australia, outside Singapore at the times
where Australia currency weakened against Singapore currency. In the past, Suntec
REIT only held Singaporean-based properties.
Rationale of Selling
Suntec REIT stock
All REIT’s stock prices have its own distinct maximum share
price due to its limited ability to generate income through renting floor
spaces of their buildings as well as its perceived net asset values.
Disclosure: I still have long position in Straits Trading and has no position in Suntec REIT and ARA.
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