UOB Kay Hian
31 July 2025

Keppel REIT: Riding High on Singapore’s Ascendancy as a Regional Office Hub — Full Analysis and 2025 Outlook

Overview: Keppel REIT Maintains Buy Rating with Attractive Upside

Keppel REIT (KREIT), a leading real estate investment trust with a portfolio of premium Grade A office buildings across Asia Pacific, continues to capitalize on Singapore’s growing status as a financial and regional hub. UOB Kay Hian maintains its BUY rating with a target price of S\$1.18, representing a potential upside of 21.6% from the current share price of S\$0.97. KREIT’s assets under management stand at S\$9 billion, with properties located in prime business districts across Singapore, Australia (Sydney, Melbourne, Perth), South Korea (Seoul), and Japan (Tokyo).

Key Stock Data and Performance Highlights

• GICS Sector: Real Estate
• Market Capitalization: S\$3,764.1 million (US\$2,921.7 million)
• Shares Outstanding: 3,880.5 million
• 52-week Range: S\$0.985 / S\$0.76
• 3-Month Avg Daily Turnover: US\$3.7 million
• Major Shareholder: Keppel REIT Investment (29.5%)
• FY25 NAV/Share: S\$1.23
• FY25 Net Debt/Share: S\$0.66

KREIT’s share price has demonstrated resilience with a notable 9.0% gain in the last month, 14.1% in three months, and a year-to-date return of 11.5%.

1H25 Results: Strong Rental Reversion and Portfolio Growth

KREIT reported robust performance in 1H25, benefiting from a positive rental reversion of 12.3% and aiming for double-digit reversion through FY25. The trust has made significant strides in backfilling vacancies, particularly at Ocean Financial Centre (OFC) in Singapore and 255 George Street in Sydney. Notably, net property income (NPI) from Australia surged 13.4% year-on-year, underscoring the strength of its international portfolio.

1H25 Financial Highlights

Key Operational Metrics

• Portfolio Occupancy: Stable at 95.9% as of June 2025
• WALE: 4.8 years (top 10 tenants: 9 years)
• Aggregate Leverage: 41.7%, with interest coverage ratio of 2.6x
• Average Cost of Debt: 3.51%
• Backfilling Success: 73% of space returned by BNP Paribas at OFC has been leased, driving occupancy up to 96.1%. All fitted suites at 255 George Street are now fully committed, raising occupancy to 99.0%.

Geographical and Sectoral Diversification

KREIT’s portfolio is well-diversified, both geographically and by tenant sector, which underpins its resilience:

• Portfolio Valuation by Country:
  • Singapore: 78.6%
  • Australia: 17.5%
  • South Korea: 3.0%
  • Japan: 0.9%
• Diversified Tenant Base: 494 tenants across key sectors:
  • Banking, Insurance & Financial Services: 30.5%
  • Technology, Media & Telecoms: 16.4%
  • Government Agencies: 16.6%
  • Energy, Shipping & Marine: 6.8%
  • Manufacturing & Distribution: 7.9%
  • Legal, Real Estate & Property Services, Accounting & Consultancy: 16.8%
  • Retail and F&B, Services, Others: 5.0%

The top 10 tenants contribute a significant portion of rent, led by the State of Victoria, DBS, and the Government of Western Australia.

Financial Summary and Key Metrics

Debt Profile and Risk Management

KREIT continues to prudently manage its financial position:

• Aggregate leverage slightly declined by 0.4 percentage points quarter-on-quarter to 41.7%.
• Interest coverage ratio at 2.6x, well above the regulatory minimum.
• Debt maturity profile is well-staggered, with an average term to maturity of three years.
• Average cost of debt remains stable at 3.51%, with expectations of gradual decline as interest rates peak.
• The trust is prepared to consider equity fundraising, especially for potential acquisitions in Japan, as part of deleveraging efforts.

Market Outlook: Singapore’s Office Sector and Growth Prospects

Singapore’s position as a financial and regional hub continues to strengthen, aided by easing global trade tensions and the progress of mega trade deals involving the US and EU. Singapore’s reciprocal tariff of 10% remains the lowest in ASEAN, supporting its attractiveness for multinational corporations, particularly those in manufacturing.

• Grade A Core CBD office rents grew for the second consecutive quarter, up 1.3% YoY and 0.4% QoQ to S\$12.10psf pm in 2Q25, driven by a flight to quality.
• Vacancy rates eased to 5.3%, and new developments such as IOI Central Boulevard have achieved 85% occupancy.
• Rental demand was robust from financial services (insurance, asset management, hedge funds), as well as pharmaceutical and manufacturing sectors.
• CBRE forecasts 2–3% full-year rental growth for 2025.

Leadership Transition and Strategic Direction

Chua Hsien Yang assumed the role of CEO from 1 January 2025. With over 20 years of experience in real estate fund management and previous stints as CEO of Keppel DC REIT and Managing Director & Head of Mergers & Acquisitions, he brings strong leadership credentials to drive KREIT’s next phase of growth.

Valuation and Investment Recommendation

• 2026 Distribution Yield: 6.9% (compared to CICT’s 5.1% and Suntec’s 4.8%)
• P/NAV: Currently at 0.80x, representing a 20% discount to NAV per unit (S\$1.21)
• Valuation Methodology: Target price of S\$1.18 is derived based on the dividend discount model (cost of equity: 6.0%, terminal growth: 1.5%)
• Share Price Catalysts:
  • Resilient office rents and capital values in Singapore and Sydney
  • Full-year rental contribution from the newly acquired 255 George Street, Sydney
• Maintained Recommendation: BUY

Summary Table: Key Operating Metrics (Recent Quarters)

*hoh % change for DPU

Conclusion: Keppel REIT Positioned for Sustainable Growth

Keppel REIT’s robust operational performance, sustained rental growth, solid balance sheet management, and attractive yield profile make it a compelling choice for investors seeking exposure to premium office assets in Asia Pacific. Backed by a strategic geographic footprint and deep tenant diversification, KREIT stands to benefit from Singapore’s and Sydney’s continued economic strength and global relevance.