Keppel REIT - RHB Invest 2016-04-15: No Change to NEUTRAL rating

Keppel REIT - RHB Invest 2016-01-19: Fairly Valued For Now KEPPEL REIT K71U.SI 

Keppel REIT - No Change to NEUTRAL rating 

  • We make no change to our NEUTRAL rating, forecast and DDM-derived TP (CoE: 7.3%, Tg: 1%) of SGD0.83, FY16 dividend yield of 7.0%
  • 1QFY16 DPU declined 1.2% YoY meeting 25% of our full year forecasts, while its achieved an average positive rental reversion of 7% for leases inked in 1Q16. Its overall portfolio occupancy inched up marginally to 99.4%. 
  • While management has commented that it expects the SG office leasing market to remain challenging in these two years, we also take a pessimistic view of the Singapore office market as we note that most of the large supply will only be completed in 4Q16. Therefore, we expect pessimism to prolonged into 2017. 
  • We also want to highlight that the current office leasing environment is challenging, as proven by the low pre-commitment level (18%) at the upcoming Guoco Tower. 
  • Additionally, Keppel REIT (KREIT SP) remains one of the most aggressively leveraged office REIT (39%) and is highly exposed to the cyclical banking sector.

Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-04-15
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.83 Same 0.83