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Wednesday, August 04, 2021

Keppel REIT Review @ 4 August 2021

Basic Profile & Key Statistics

Keppel REIT (KREIT) is an office REIT that owns 10 properties across Singapore, Australia and South Korea.

Performance Highlight

KREIT performance has improved tremendously mainly due to contributions from Victoria Police Centre, Pinnacle Office Park and Keppel Bay Tower.

The acquisition of Keppel Bay Tower is completed in May. 

On 30 July, KREIT has completed the divestment of 275 George Street at a premium above book value. 

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 40.3%
  • REIT manager's shareholding is high at 1.84%
  • Directors of REIT manager's shareholding is low at 0.07%

Lease Profile

  • Occupancy is slightly high at 96.7%
  • WALE is long at 6.2 years
  • Highest lease expiry within 5 years is low at 18.7% which falls in 2022
  • Weighted average land lease expiry is long at 87.28 years

Debt Profile

  • Gearing ratio is moderate at 38.9%
  • Cost of debt is low at 1.97%
  • Fixed rate debt % is slightly high at 82%
  • Unsecured debt % is moderate at 77.7%
  • WADM is slightly long at 3.1 years
  • Highest debt maturity within 5 years is moderate at 32% which falls in 2024
  • Interest coverage ratio is moderate at 4 times
  • Perpetual securities over debts is moderate at 9.7%

Diversification Profile

  • Top geographical contribution is high at 68.1% 
  • Top property contribution is high at 32.2% 
  • Top 5 properties contribution is high at 80.3% 
  • Top tenant contribution is low at 8.8% 
  • Top 10 tenants contribution is moderate at 36.1%

Key Financial Metrics

  • Property yield is low at 4.3% 
  • Management fees over distribution is high at 23.6% in which unitholders receive S$ 4.24 for every dollar paid 
  • Distribution on capital is low at 2.7%
  • Distribution margin is high at 57.8%
  • 0.5% of the past 12 months DPU is from income support

Trends

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

Relative Valuation

  • P/NAV - Average for 1y, 3y and 5y
  • Dividend Yield - Average for 1y and 5y; Higher than average for 3y

Author's Opinion

 Favorable  Less Favorable
High REIT Sponsor's ShareholdingLow Directors of REIT Manager's Shareholding
High REIT Manager's ShareholdingHigh Top Geographical Contribution
Long WALEHigh Top Property & Top 5 Properties Contributions
Well Spread Lease ExpiryLow Property Yield
Long Weighted Average Land Lease ExpiryNon-Competitive Management Fees
Low Cost of DebtLow Distribution on Capital
Low Top Tenant Contribution 
High Distribution Margin

KREIT fundamentals and performance have improved as compared to the previous year. Now, KREIT is able to increase its DPU without being required to top up DPU with proceeds from divestment. On 2 August, Keppel Corporation proposed the acquisition of SPH in which for every 1000 SPH shares, unitholders would receive S$ 668 + 598 KREIT shares + 782 shares. At this moment, there is no detail on how this would impact KREIT moving forward.


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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.

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