[SGMarket]

PhillipCapital keeps 'accumulate' call and TP of 94 cents on LREIT after acquisition of remaining interest in Jem

PhillipCapital analyst Natalie Ong has kept her “accumulate” call on Lendlease Global Commercial REIT (LREIT) after the REIT proposed to acquire the remaining interest it does not own in Jem on Feb 15.

In her report on Feb 23, Ong notes that the proposed acquisition will double LREIT’s assets under management (AUM) and market capitalisation, propelling it to become one of the top 20 Singapore REITs (S-REITs).

However “the large quantum of the acquisition necessitates equity fundraising, which carries a higher cost of capital, making this leg of the Jem acquisition less accretive compared to previous rounds,” she says.

“Based on our forecast, the acquisition of the remaining 86.15% stake in Jem is marginally accretive at 0.1%, in line with the pro-forma distribution per unit (DPU) accretion of 0.1-3.0%,” she adds.

To this end, Ong has increased her DPU estimate for the FY2022 and FY2023 by 1.7% and 0.3% respectively, while her DPU estimates for FY2024-FY2026 were lowered by 0.4%-1.1% due to the REIT’s enlarged share base.

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