Keppel REIT - Outlook Remains Positive
- Keppel REIT (SGX:K71U) reported 1H22 gross revenue of S$109.8m, +3.7% y-o-y, while distributable income grew 4.6% y-o-y to S$110.5m. The improvement was due to contributions from Keppel Bay Tower from May 21 and higher income from Ocean Financial Centre, 8 Exhibition St and Pinnacle Office Park, partly offset by a weaker A$.
- Keppel REIT's portfolio committed occupancy rose q-o-q to 95.5% at end-1H22. Together with leases under various stages of documentation/negotiation and a robust demand outlook, we believe portfolio committed occupancy is likely to trend up in coming quarters.
- To manage rising operating costs, Keppel REIT was able to pass on the higher costs in the form of increased service charges for some of its Singapore leases.
- Meanwhile, in Australia, leasing of vacated space at 8 Chifley Square in Sydney progressed with occupancy recovering to 82%. The development project, Blue & William, is ~48.7% constructed and is on track to be completed by mid-2023F.
- Keppel REIT’s aggregate leverage stands at 37.9% as at end-1H22 following its revaluation exercise. In terms of forex exposure, Keppel REIT indicated that it has hedged 50-80% of its A$ exposure over a 12-18 month period.
- We leave our FY22-24F DPU estimates for Keppel REIT unchanged and retain our DDM-based target price of S$1.29.
- Potential catalysts include the redeployment of divestment proceeds to new accretive acquisitions and a better-than-projected office rental market, while downside risks include longer-than-expected frictional vacancy from tenant movements due to a slower than-expected backfilling of office space.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2022-07-27 2022-07-27
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