To The Moon

$Lendlease Global Commercial REIT(JYEU.SI)$ (LREIT)- Emerging dominant retail play

LREIT is a hidden gem with the potential to emerge as a strong contender within the retail S-REIT space. With JEM in the bag, the risk-reward profile for LREIT has turned more favourable with higher growth visibility, while it rides on the rebound of its key assets 313@Somerset and JEM.

Operating metrices continue to be strong with 313@Somerset's tenant sales hitting past pre-COVID levels. Occupancy cost (c.15%-18%) are at healthy levels, implying upside for rents. It is anticipated (i) Higher GTO rental benching on record high sales, (ii) moderation of passing rents to match FY19 levels, and (iii) Easing cost pressures to drive higher margins for the retail business in FY23.

Yield disparity against peers to drive a share price re-rating. LREIT trades at a unwarranted yield discount of c.100bps to its retail peers. Over time, LREIT's Singapore-centric strategy with an attractive pipeline of dominant commercial assets are unique attributes.

Various analysts have pegged TPs ranging from S$0.87-S$1.05. This would imply a good potential upside of around 12%-50% to its last traded price of S$0.70. At a current dividend yield of 5.69%, this stock could be a gem that can offer good capital appreciation as well as a good annual dividend that is way higher than inflation rate and interest given in CPF SA account.

I feel that this stock seems a bit underrated, maybe because Temasek Holdings is not vested here. But at the rate the Jurong East area growing and developing, and very fast becoming a second major hub in Singapore, this stock could offer a lot of upside potential if held for long term. This may be a great addition to those who are lacking REITs or dividend yielding stocks in their portfolio. However, before making any trading decisions, it is best to DYODD. Because I am quite vested in this stock and my views here could be biased.