Paragon REIT ‘one of the key beneficiaries’ of Singapore’s reopening; upgrade to ‘purchase’: DBS & More Trending News

 

DBS Group Research analysts Geraldine Wong and Derek Tan have upgraded Paragon REIT (previously SPH REIT) to “buy” from “hold” beforehand.

Wong and Tan have additionally raised their goal value to $1.10 from 96 cents.

Singapore’s tourism sector seems to be set to get a raise from China’s border reopening. To this finish, Paragon REIT may also stand as one of the key beneficiaries of the opening. The REIT has the largest publicity to Orchard retail, with Paragon mall anchoring 65% of its portfolio (by asset valuation), observe the analysts.

“Indonesian and Chinese spenders are the two titans when it comes to tourist spending at Paragon, making up a collective 32% of mall footfall. We expect further developments on China’s border reopening to be a key catalyst for the stock,” they write.

As tenant gross sales in Paragon proceed to get better on the again of larger home spending and the larger quantity of vacationers since borders reopened in April 2022, Wong and Tan estimate that the mall’s tenant gross sales have reached round 89% of its 2019 ranges on a full-year foundation.

At its present unit value ranges, the REIT is buying and selling at an “attractive” P/BV of 1.0x and an FY2023 yield of 5.6%, beneath its historic imply, say the analysts.

See additionally: Sheng Siong stays defensive amid rising inflation and GST hike, analysts preserve ‘purchase’

In addition to their upgrade, the analysts see the risk of a takeover for the REIT.

“With a new sponsor being Cuscaden Peak Pte Ltd, whose ultimate shareholders are sponsors of other listed REITs, we believe that a takeover could be a possible scenario to unlock value,” the analysts write.

“In our scenario analysis, our proforma estimates imply an accretion for unitholders up to a 1.2x P/BV for Paragon REIT,” they add.

See additionally: LREIT’s Jem affords higher prospects than Jurong Point; implied cap fee enlargement of 90 bps ‘overly unfavorable’: Citi

The analysts’ larger goal value accounts for his or her valuations rolled ahead into the FY2023 with a weighted common price of capital (WACC) of 6.4%, from 6.8% beforehand. The decrease WACC is to account for a decrease threat premium on the again of benefitting from return of reopening and the Chinese vacationers, the analysts add.

Units in Paragon REIT closed 0.5 cent larger or 0.51% up at 98 cents on Jan 26.

Paragon REIT ‘one of the key beneficiaries’ of Singapore’s reopening; upgrade to ‘purchase’: DBS

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Paragon REIT ‘one of the key beneficiaries’ of Singapore’s reopening; upgrade to ‘purchase’: DBS

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