KEPPEL REIT
K71U.SI
REITs – Singapore - 1Q18: KREIT (In Line)
- Keppel REIT (KREIT)’s 1Q18 DPU declined 2.1% y-o-y, mainly on lower contributions from 275 George Street.
- Management guided an upbeat office sector outlook.
- Maintain BUY and target price of S$1.43.
Results in line with expectations.
- Maintain BUY and target price of S$1.43, based on DDM (required return: 6.7% and terminal growth of 2.5%).
- Keppel REIT (KREIT)'s 1Q18 DPU of 1.42 S cents was down 2.1% y-o-y, while gross revenue and NPI were S$39.7m and S$31.2m, down 0.3% y-o-y and 0.6% y-o-y respectively, mainly due to lower contributions from 275 George Street, but partially offset by increased contributions from Bugis Junction Towers, Ocean Financial Centre, 8 Exhibition Street, lower amortisation expense, lower trust expenses and net forex differences.
- Results were in line with our expectations, with 1Q18 DPU representing 24.1% of our full-year forecast.
Overall committed occupancy remained healthy at 99.4%.
- Committed occupancy of the Singapore office portfolio remained high at 99.8% (vs core CBD average occupancy of 94.1%).
- Committed occupancy of the Australian portfolio remained stable at 97.9% (vs national CBD office average occupancy of 89.6%).
Well-spread leases, with no more than 20% portfolio NLA expiring in a year.
- Some 15% and 11.9% of its leases are for renewal and review in 2018-19 respectively. Of the 674,100sf (attributable area of 261,400sf) renewed, 23.3% were new leases, 10.5% were renewal leases, and 66.2% were review leases.
- Tenant retention remained high at 93% (4Q17: 95%).
New leases were signed with tenants from diverse sectors.
- In Singapore, the majority of the leases were from expansions in the legal sector, while in Australia, demand came from a government agency taking space at 275 George Street in Brisbane.
- Overall, the new leases comprise mainly government agency (45.9%), legal (35%), TMT (5.9%), real estate & property services (5.5%), by attributable area. The average signing rents for Singapore office leases was around S$10.05psf pm.
Aggregate leverage remained stable at 38.6%.
- Weighted average term to maturity of borrowings was 3.2 years. Interest rate was stable at 2.75% with interest coverage ratio at 4.1x.
Improving office outlook in Singapore and Australia.
- Management cited property consultants' upbeat view of the Singapore office market, supported by improving confidence in the finance, energy and professional services sectors. The average Grade A rents continued to rise to S$9.70psf pm in 1Q18 (4Q17: S$9.40) due to strong demand from the insurance and TMT sectors, and flexible space providers, as reported by CBRE.
- In Australia, JLL reported a marginal improvement in the national CBD office average occupancy to 89.6% (4Q17: 89.2%). The vacancy level is also at its lowest since 2013, driven largely by employment growth.
Vikrant Pandey
UOB Kay Hian
|
Loke Peihao
UOB Kay Hian
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http://research.uobkayhian.com/
2018-04-19
1.430
Same
1.430
