SOILBUILD BUSINESS SPACE REIT

SOILBUILD BUSINESS SPACE REIT | BUY

March 29 close: S$0.65

Fair value: S$0.70

OCBC Investment Research, March 29

Based on assumptions we made of the probability of default and repossession, we projected Soilbuild Reit would effectively lose around six months' worth of rent for the NK Ingredients asset in FY2018. We have now updated our probability-based assumptions and expect only around one month of lost income.

With the greater certainty we now have on the NK Ingredients issue and the divestment of KTL Offshore last month, we are more confident of Soilbuild Reit's prospects than we were before. Our fair value increases from S$0.68 to S$0.70.

We expect the operating environment in the industrial space to remain challenging for much of this year, but even with this in mind, we find Soilbuild Reit's unit price as of Wednesday attractive. We upgrade from "hold" to "buy".

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