Keppel REIT - RHB Invest 2024-10-22: Healthy Office Momentum Continues; BUY

• Keppel REIT’s healthy set of 3Q24 numbers were in line. Portfolio occupancy improved q-o-q, aided by improvements in its Australian assets with a strong double-digit rent reversion – indicating office market conditions continue to remain healthy. Financing costs inched up during the quarter but are likely to peak by 1Q25.
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3Q24/9M24 distributable income from operations fell 2% y-o-y

• Keppel REIT's 3Q24/9M24 distributable income from operations fell 2% y-o-y, mainly due to higher borrowing costs which increased 33% y-o-y year-to-date. NPI (9M24) rose 11% y-o-y with growth seen across all its markets driven by both organic and inorganic growth.
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Portfolio occupancy improved 0.6ppt q-o-q

• Keppel REIT's portfolio occupancy improved 0.6ppt q-o-q to 97.6%, with an increase in leasing volumes (+21% q-o-q) signed during the quarter and higher proportion of new leases (~43% of total), indicating healthy office demand across its portfolio.
• Occupancy improvements came mainly from its Australian assets – 8 Exhibition Street, Melbourne and Pinnacle office Park, Sydney while the Singapore portfolio remained relatively stable. Demand came mainly from financial services, legal, and real estate sectors.
• BNP Paribas, one of Keppel REIT’s top 10 tenants, has slightly downsized its footprint in the Ocean Financial Centre and management noted that a third of this space has been backfilled by a legal tenant with positive rent reversions.

Healthy double-digit rent reversions

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Shekhar Jaiswal RHB Securities Research | https://www.rhbgroup.com/ 2024-10-22 SGinvestors.io

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