Business Description

Keppel REIT is one of Asia’s leading real estate investment trusts with a diversified portfolio of prime commercial properties, strategically situated in key business districts across Asia Pacific. The portfolio is valued at over \$9 billion and includes properties in Singapore (77.9% of the portfolio), Australia (18.3%), South Korea (2.9%), and Japan (0.9%). The company’s core business involves generating stable income through income-producing commercial real estate and real estate-related assets.

Keppel REIT is managed by Keppel REIT Management Limited and sponsored by Keppel, a global asset manager with expertise in sustainability-related solutions. Competitors include other prominent REITs operating in Asia-Pacific, such as CapitaLand Integrated Commercial Trust and Mapletree Commercial Trust, with Keppel REIT holding a strong position due to its portfolio quality and high occupancy rates.

Revenue Streams & Customer Base

Keppel REIT derives revenue primarily from property income generated by leasing its commercial properties. In FY 2024, the company achieved a property income of \$261.6 million, a 12.2% increase year-on-year. Key tenants hail from diverse sectors, including banking and financial services (24.7%), technology, media, and telecommunications (17.2%), and legal services (16.3%).

Key Financial Highlights

Income Statement Analysis

• Property Income: Increased by 12.2% year-on-year to \$261.6 million in FY 2024, driven by strong operational performance and contributions from new acquisitions ([[2]], [[3]]).
• Net Property Income (NPI): Grew by 10.7% to \$201.9 million year-on-year ([[2]], [[3]]).
• Distributable Income: Decreased by 1.9% year-on-year to \$214.5 million due to higher borrowing costs ([[3]]).
• DPU: FY 2024 distribution per unit (DPU) was 5.60 cents, down from 5.80 cents in FY 2023 ([[2]], [[3]]).

Balance Sheet Analysis

• Healthy aggregate leverage at 41.2% as of end-2024, with 69% of borrowings on fixed rates ([[3]]).
• Weighted average term to debt maturity at 2.5 years, with a focus on sustainability funding (82% of total borrowings as of end-2024) ([[3]]).

Cash Flow Statement Analysis

The report does not provide specific details on cash flow statements; however, increased borrowing costs due to new acquisitions and refinancing at market rates impacted income distribution ([[2]], [[3]]).

Dividend Policy

Keppel REIT maintained its Anniversary Distribution policy, contributing \$20 million annually over a five-year period announced in October 2022. For FY 2024, this equates to a stable payout of 5.60 cents per unit ([[2]], [[3]]).

Special Activities

Keppel REIT undertook asset enhancement initiatives, including refurbishments and new F&B offerings at One Raffles Quay, alongside securing new tenants such as Alstom at 2 Blue Street, which improved occupancy rates ([[4]]).

Recommendation

For Current Investors

Hold: Keppel REIT’s strong operational performance, high occupancy rates, and sustainable dividends make it a stable investment. However, rising borrowing costs and a slight dip in distributable income warrant caution.

For Prospective Investors

Buy: Long-term investors could consider Keppel REIT given its resilience, diversified portfolio, and strong demand for prime office spaces. The current distribution yield of 6.4% as of FY 2024 makes it an attractive option amidst market uncertainties ([[3]]).

Disclaimer: This recommendation is based on the FY 2024 financial report and does not consider external market conditions or individual financial circumstances. Please consult a financial advisor before making investment decisions.