RHB keeps ‘buy’ on Suntec Reit following Hongkong Land’s acquisition of 10.8% stake

[SINGAPORE] RHB Group Research is keeping its “buy” rating on Suntec Real Estate Investment Trust (Reit) following Hongkong Land’s purchase of a 10.8 per cent stake in the trust.

The 318 million units valued at S$541 million was sold by ESR Group to Jardine’s property arm at S$1.70, above the market price. The reit was trading 2.74 per cent up at S$1.50 on Friday (Mar 20) before the lunch break. Hongkong Land said its acquisition was made at a discount to the trust’s net asset value of S$2.03 a unit as at Dec 31, 2025. 

In a research note on Friday (Mar 20), RHB analysts indicated that divestment was “anticipated” after ESR sold the reit manager to Gordon and Celine Tang’s Tang Organization.

The Tangs have announced plans for a strategic review of Suntec Reit’s portfolio aimed at boosting its “portfolio performance” and higher level of distributions in the coming years.

In its statement on Thursday, Hongkong Land said it “recognises Suntec Reit’s strategic potential to unlock value across its portfolio and (its) commitment to driving sustainable long-term growth for all unitholders.

It added that the acquisition will enable the group to deploy recently recycled capital into prime, income-producing commercial assets in the city-state.

“This aligns with the company’s positive outlook and conviction in Singapore’s prime commercial property market. The yield derived from the company’s stake in Suntec Reit will contribute to the diversification of Hongkong Land’s earnings profile.” 

RHB said the premium to market price Hongkong Land paid was a surprise given current market conditions.

It noted that the group has been in “divestment mode” over the last two years in order to crystallise its net asset value.

Last December, it sold its one-third stake in Marina Bay Financial Centre (MBFC) Tower 3 to Keppel Reit for S$1.45 billion.

More recently, it set up a private fund to hold a one-third stake in Marina Bay Financial Centre Tower 1 and 2, and One Raffles Quay, in which Suntec Reit also has a one-third stake.

RHB’s analysts said Hongkong Land’s investment could lead to Suntec selling these interests to Hongkong Land’s private funds at a premium. The proceeds could possibly be used to acquire the 9 Penang Road asset – a Grade A commercial building – from Suntec’s sponsor, they said.

Another possibility – though with a low likelihood – is the privatisation of Suntec Reit and moving the assets to a private fund. “(This is so) it can fetch higher valuation compared to an approximate 30 per cent discount to book value,” the analysts said.

With Tang Organization’s recent acquisition of the Reit manager, the analysts believe the odds of a privatisation are “low”.

On the whole, RHB analysts regard the transaction “positively. “(This is because it) clears the overhang of ESR’s stake; and brings in a new, strategic shareholder who has deep experience in the prime commercial market, and is active in value unlocking of assets,” they said.

They have kept a target price of S$1.67 on Suntec Reit.