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Monday, April 19, 2021

Keppel Pacific Oak US REIT Review @ 19 Apr 2021

Basic Profile & Key Statistics

Keppel Pacific Oak US REIT (KORE) is a pure office REIT that owns 13 properties in U.S. 

Performance Review

Gross revenue decreased YoY by 2.1%, while adjusted NPI and distributable income increased YoY by 2.7% and 3.6% respectively. The distributable income is equivalent to 1.57 ~ 1.58 cents of DPU.
Rental reversion is at +5.7% driven by growth in Seattle and Austin.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 7.95%
  • REIT manager's shareholding is high at 1.16%
  • Directors of REIT manager's shareholding is high at 0.96%

Lease Profile

  • Occupancy is slightly low at 91.6%
  • WALE is slightly short at 3.7 years
  • Highest lease expiry within 5 years is low at 17% which falls in 2023
  • All properties are freehold

Debt Profile

  • Gearing ratio is moderate at 37.5%
  • Cost of debt is moderate at 2.82 %
  • Fixed rate debt % is high at 84.7%
  • All debts are unsecured debts
  • WADM is slightly short at 2.7 years 
  • Highest debt maturity within 5 years is slightly low at 28.6% which falls in 2022
  • Interest coverage ratio is high at 4.8 times

Diversification Profile

  • Top geographical contribution is low at 38.5%
  • Top property contribution is low at 16.9%
  • Top 5 properties contribution is moderate at 61.9%
  • Top tenant contribution is low at 3.3% 
  • Top 10 tenants contribution is low at 19.9% 

Key Financial Metrics

  • Property yield is high at 6.4%
  • Management fees over distribution is low at 11.3% in which unitholders receive US$ 8.85 for every dollar paid 
  • Distribution on capital is high at 4.7%
  • Distribution margin is slightly low at 42.6%

Trends

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


Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 6.26 cents / average yield @ 8.23% = US$ 0.76
  • Price/NAV - NAV @ US$ 0.82 x average P/NAV @ 0.89 = US$ 0.73


Author's Opinion

 Favorable Less Favorable
High Manager's ShareholdingLow Sponsor's Shareholding
High Directors of REIT Manager's ShareholdingInterest Coverage Ratio Downtrend
Well Spread Lease Expiry 
All Freehold Properties 
High Fixed Rate Debt % 
100% Unsecured Debt 
High Interest Coverage Ratio 
Low Top Geographical Contribution 
Low Top Property Contribution 
Low Top Tenant & Top 10 Tenants Contributions 
High Property Yield 
Competitive Management Fees 
High Distribution on Capital 
DPU Uptrend

From the above, KORE fundamental remains resilient. Although the COVID-19 vaccination is raising confidence in employers for returning to the workplace, KORE has projected the rental growth to be negative to be between -5.3% to -0.9%, with the properties in Seattle are expected to be impacted most.


For more information, you could refer to:

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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REIT Investing Community - Facebook Group where members share and discuss REIT topic


*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 as well as 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.

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