Keppel REIT (Keppel REIT SP)

Overview:

Keppel REIT is a Singapore-based real estate investment trust (REIT) that focuses on investing in prime office properties. Keppel REIT’s performance in 1H24 was supported by increased property income from its key assets, particularly the Ocean Financial Centre and KR Ginza II in Singapore and 255 George Street in Australia.

• 1H24 Performance:
  • Property Income Growth: Increased by 8.9% YoY, mainly driven by improved occupancy at key properties.
  • Distributable Income and DPU: However, both distributable income and distribution per unit (DPU) declined by 1.9% and 3.4% YoY due to higher borrowing costs.
• Balance Sheet and Borrowings:
  • Leverage: Keppel REIT maintains a healthy balance sheet with an aggregate leverage ratio of 41.3%, and 65% of its borrowings are fixed-rate loans, helping to mitigate interest rate risk.
  • The company’s debt portfolio includes loans denominated in AUD (18%), KRW (3%), and JPY (2%).
• Geographic Performance:
  • Singapore: Strong rental growth and high occupancy rates.
  • Australia: Higher net property income (NPI) from newly acquired 255 George Street and 2 Blue Street.
  • North Asia: Full occupancy in KR Ginza II and T Tower properties contributed positively to NPI.

Outlook:

• Future Growth: Keppel REIT’s diversified tenant base, strong demand for prime office space, and stable lease expirations support its medium-term outlook. The REIT is expected to benefit from a potential recovery in office demand across Singapore and Australia.
• Valuation: Keppel REIT currently trades at 0.7x P/B with a dividend yield of 6.2%. Consensus target price stands at S$1.02, offering an upside of approximately 10% from the current price of S$0.925.Thank you