Keppel Pacific Oak US REIT - RHB Invest 2023-02-02: Calm Amidst The Storm; Keep BUY

• Stay BUY on Keppel Pacific Oak US REIT (KORE, SGX:CMOU) with revised DDM-derived US$0.69 target price from US$0.74, 27% upside. Keppel Pacific Oak US REIT’s FY22 results were slightly below (96% of forecast), while valuations surprised on the upside.
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• Keppel Pacific Oak US REIT's 4Q22 adjusted NPI down 6% q-o-q due to lower income from assets divested during the quarter and higher repair and maintenance expenses. Adjusted DPU (2H) was 2.8% lower y-o-y as higher revenue was offset by an increase in interest and property expenses.
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• Overall portfolio value of Keppel Pacific Oak US REIT surprised on the upside, coming in relatively flat (+0.2% y-o-y) on an absolute basis, but declined 2.7% when including capex and tenant improvements. In comparison, its peer Manulife US REIT (SGX:BTOU) earlier announced a 11% valuation decline. This again differentiates a relatively positive outlook on Keppel Pacific Oak US REIT’s submarket and its limited tenant concentration risks.
• Year-to-date, Keppel Pacific Oak US REIT's share price has bounced back ~19%, but remains cheap at 30% below book and offers 10% yield – see Keppel Pacific Oak US REIT's Dividend History.

Outlook moderated but still positive.

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