Suntec REIT trades at 0.7x FY12F book

+ Suntec REIT recently announced that it has successfully converted the vehicle which holds Marina Bay Financial Centre Phase 1 (MBFC1) from a private limited to a LLP (limited liability partnership) structure, which grants it tax transparent status.

+ Based on our estimates, Suntec will enjoy tax savings of SGD2.8-5.2m for FY12-15F, adding 0.8-1.5% to our forecasted DPU. We understand that the restructuring of One Raffles Quay (ORQ) into a similar tax-efficient LLP structure may not happen in the near term and has not factored this into our estimates (estimate boost of another SGD1.7-3.3m if allowed).

+ After factoring in the tax savings, our target price for Suntec goes up by ~6% to SGD1.37. The stock currently trades at 0.7x FY12F book and 7% FY12F yield. Downside risks include worse-than-expected average rentals for SCM and concentration risk on Suntec City. Reiterate HOLD.