Sunday, May 7, 2023

Suntec REIT And Apple: Results And Looking Forward

Recently two of our holdings, Suntec REIT and Apple, had reported their quarterly results. The reason why I had selected these two is because of the mixed reactions to the published figures. Let us take a brief look at each of the counters. 

Suntec REIT


In a recent announcement, Suntec REIT had recorded a 27.4% decline in distribution per unit (DPU, or dividend in REIT speak) for the first quarter of 20231. The reasons cited were higher financing costs, weaker Australian Dollar and Pound Sterling against the Singapore Dollar vis a vis the REIT’s properties in Australia and the United Kingdom, and a lower joint venture income from Marina Bay Financial Centre. This is despite the rise in gross revenue and net property income (NPI) mainly contributed by Suntec City itself. In fact, Suntec REIT had also reported a fall in DPU for the second half of 2022, stating a sharp increase in financing costs for the reason, again regardless to the increase of gross revenue and NPI2.


From these two pieces of news, the main culprit for the lowering of DPU is financing costs, which is a given due to the rising interest rates that happened within the last 12 months or so, and of course foreign exchange risks.




Apple had beaten estimates to its quarterly results3: earnings per share +USD 0.09 at USD 1.52, revenue +USD 1.88 billion at USD 94.84 billion and gross margin +0.2% at 44.3%. However, if we looked below the revenue figures, revenues from the sale of Macs, iPad and services were below expectations, with other products and in particular the iPhone sales carrying the team.


Another point to note is that the year-on-year revenues for the current and last quarter had fallen 5%4 and 3%5, respectively. The CFO for Apple also mentioned that the next quarter results would be similar “…assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter”3


The Past, The Present And The Future


Quarterly results are about the numbers that were achieved and realised during the last three months, which the timeframe is known as the past. We knew that past results are not indicative of future performance, so the relative not-so-good news may not mean as such when the next quarter(s) arrives. Driven by high interest rates, which increased financing costs (and affecting Suntec REIT) and the possibility of a recession (and somewhat affecting Apple), present signs and indicators are pointing to some doom and gloom approaching from the horizon, despite knowing that we truly cannot tell the future.


On the flip side, the recent announcement by the Federal Reserve (Fed) had hinted to a pause on further interest rate increases6. The Fed, while combating inflation by accelerating interest rates which would likely cause a recession, would want to have a “soft landing”, i.e., a less painful recession or possibly avoiding it altogether. If this do happen, it would be a reversal of the “doom and gloom” mentioned in the last paragraph.


So, in conclusion, the markets and economy could go either way.


Individual Counter Perspectives


With the total opening of borders and mass easing of pandemic restrictions, NPI from Suntec City, the crown jewel of Suntec REIT, is increasing with the return of tourists, shoppers, convention visitors and office workers. In the first quarter of 2023, Singapore had welcomed 2.9 million visitors, according to the Singapore Tourism Board (STB). In addition, STB had highlighted it will work with stakeholders on six key areas, one of which is to be a leading MICE (meetings, incentives, conventions and exhibitions) destination7, in which Suntec REIT would be a direct beneficiary.


As for Apple, no one could beat its ecosystem of products and services. Recently, they had, together with Goldman Sachs, launched a savings account that offered a high yield of 4.15% to Apple Card users. Under the stewardship of its pragmatic CEO, Apple, though large, is nimble enough to maneuver itself through different regions in terms of production and revenue sources, with India being the next big place.


Whichever way the economy is heading, we would slowly increase our holdings if the prices are going down, or to enjoy better returns (dividends, DPU and capital) in the immediate future quarters if the prices are going up.


1 – Tan, Felicia. Suntec REIT reports 27.4% lower DPU of 1.737 cents in 1QFY2023. The Edge. 26 Apr 2023. (accessed 7 May 2023)


2 – Tan, Janice. Suntec Reit’s H2 DPU falls 9.7% to $0.04074 as financing costs rise. The Business Times. 20 Jan 2023. (accessed 7 May 2023)


3 – Leswing, Kif. Apple reports better-than-expected quarter driven by iPhone sales. CNBC. 4 May 2023. (accessed 7 May 2023)


4 – Apple reports first quarter results. Apple. 2 Feb 2023. (accessed 7 May 2023)


5 – Apple reports second quarter results. Apple. 4 May 2023. (accessed 7 May 2023)


6 – Schneider, Howard and Saphir, Ann. Fed raises rates, opens door to pause in tightening cycle. Reuters. 4 May 2023. (accessed 7 May 2023).


7 – Raguraman, Anjali. Singapore welcomed 2.9 million visitors in Q1, two-thirds of pre-pandemic numbers. The Straits Times. 7 Apr 2023. (accessed 7 May 2023)

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