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OCBC: SBREIT Offers A Potential 16% Return
Aspire, Hot Picks | 19 March 2015
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By: Raymond Leung
Articles (142) Profile

Analysts' updates on SBREIT as at 18/03/2015

Last week, SBREIT (Soilbuild Business Space Real Estate Investment Trust) became the hot favourite of the analysts from the street. They were extremely upbeat about the counter and they think you should be too!

What Happened?
On 12 March 2015, SBREIT entered into a conditional sale and purchase agreement with Technics Offshore Engineering for a property located at 72, Loyang Way. The property will be acquired for a total consideration of $98.12 million which includes $1.2 million of acquisition-related costs.

The Property
The property located at Loyang Way is an integrated facility comprising two blocks of 3-storey and 4-storey ancillary office, two high ceiling single-storey production facilities, a blasting and spray painting chamber, a 200-worker dormitory and a jetty with 142 meters of sea frontage which serves as a fully-integrated offshore supply base approved by Maritime and Port Authority.

It has a land area of 291,598.5 square feet and a gross floor area 203,467.8 square feet. This property sits on a number of JTC (former Jurong Town Corporation) leasehold estate land title which collectively expires on 20 March 2038.

Source: 72 Loyang Way Property, SBREIT

Financial Effects
After the acquisition, we believe that SBREIT will make significant improvement in its distribution as this property is yield accretive. According to analysts, NPI (Net property income) is expected to rise from $57 million to $64 million. Distribution income is expected to grow from $50 million to $54 million which will result in a distribution per unit of $0.061 to $0.067.

The sale is expected to finish in the second quarter of 2015 but will continue to be occupied by Technics. Technics Offshore Engineering will lease 100 percent of the property back on a 15 year triple-net lease arrangement.

What Do Analysts Thinks?
Analysts from OCBC Research continue to hold a bullish view towards the SBREIT and reiterated their buy call with a potential price of $0.93. They stated that 6.9 percent NPI of this property is expected to raise the overall distributable income of the trust and is the main reason for the re-rating.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Soilbuild Business Space REIT  0.615 -- --   
Business: S'pore real estate investment trust with a focus on biz space ppties.

Insight: Jan-19, FY18 gross revenue fell marginally by 1.2%... Read More

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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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