Keppel REIT Review @ 25 October 2022

Basic Profile & Key Statistics

• Main Sector(s): Office
• Country(s) with Assets: Singapore, Australia & South Korea
• No. of Properties (exclude development/associate/fund): 10

Key Indicators

Performance Highlight

For 9M 2022, gross revenue, NPI, distributable income and DPU increased yoy mainly due to contribution from Keppel Bay Tower.

Rental Reversion

The average signing rent of the Singapore office leases for 9M2022 is S$ 11.47 psf, which is higher for those expiring in 2022, 2023 and 2024.

Development

The development of Blue & Willliam is on track to be completed by mid-2023. 

Sensitivity to Interest Rate

For every 0.5% increase in interest rate, the DPU impact is 2.1% per annum.

Related Parties Shareholding

• REIT sponsor's shareholding: Above median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 20%
• Highest lease expiry within 5 years: Below median for more than 10%; Falls in 2026
• Weighted Average Land Lease Expiry: Above median for more than 20%

Debt Profile

• Gearing ratio: ± 10% from median
• Gearing ratio includes perps: ± 10% from median
• Cost of debt: Below median for more than 10%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: ± 10% from median
• WADM: ± 10% from median
• Highest debt maturity within 5 years: Below median for more than 20%; Falls in 2024
• Interest coverage ratio: ± 10% from median

Diversification Profile

• Top geographical contribution: Above median for more than 20%
• Top property contribution: Above median for more than 20%
• Top 5 properties' contribution: Above median for more than 20%
• Top tenant contribution: Below median for more than 20%
• Top 10 tenants' contribution: ± 10% from median

Key Financial Metrics

• Property yield: Below median for more than 10%
• Management fees over distribution: Above median for more than 20%; $4.17 distribution for every dollar paid 
• Distribution on capital: Below median for more than 20%
• Distribution margin: Above median for more than 20%

Trends

• Uptrend: Interest Coverage Ratio, Property Yield
• Slight Uptrend: DPU, Distribution on Capital
• Slight Downtrend: NAV per Unit, Occupancy
• Downtrend: Distribution Margin

Relative Valuation

• P/NAV: Below -2SD for 1y, 3y & 5y
• Dividend Yield: Above +2SD for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low Directors of REIT Manager's Shareholding
High REIT Manager's Shareholding	High Top Geographical Contribution
Long WALE	High Top Property & Top 5 Properties Contributions
Well Spread Lease Expiry	Low Property Yield
Long Weighted Average Land Lease Expiry	Non Competitive Management Fees
Low Cost of Debt	Low Distribution on Capital
Well Spread Debt Maturity	Distribution Margin Downtrend
Low Top Tenant Contribution
High Distribution Margin
Interest Coverage Ratio Uptrend
Property Yield Uptrend

Property income and NPI have dropped slightly as compared to the previous quarter. Occupancy has improved from 95.5% to 96.8% and the average signing rent has increased to S$ 11.47 psf as compared to S$ 11.43 in the previous quarter. One notable announcement would be that KREIT is going to distribute a $20 million capital gain annually over the next 5 years, which amounts to a total of $100 million. $20 million is approximate 9% of the past 12 months' distribution, this would definitely help to maintain the stability of DPU in view of the impact of the interest rate hikes, inflation and rising energy cost.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.