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Thursday, February 03, 2022

Keppel REIT Review @ 3 February 2022

Basic Profile & Key Statistics

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

Performance Highlight

Property income, NPI and distributable income improved YoY mainly due to contribution from Pinnacle Office Park (acquired in Dec 2020) as well as Keppel Bay Tower (acquired in May 2021). However, DPU has decreased slightly due to enlarged unitholder base.

Rental Reversion
The average signing rent for 2021 was $10.56 psf, lower than 2020 signing rent of $11.02 psf. However, it is higher than the expiring rent in 2021, which was $9.76 psf. 

Development

In 4Q 2021, KREIT has acquired the development of Blue & William in Sydney. The development is expected to be completed by mid 2023.

Asset Enhancement Initiatives
AEI is being carried out at 8 Chifley Square, but no information on the target completion date.






Related Parties Shareholding

  • REIT sponsor's shareholding is high at 39.947%
  • REIT manager's shareholding is high at 2.346%
  • Directors of REIT manager's shareholding is low at 0.06%

Lease Profile

  • Occupancy is slightly high at 95.4%
  • WALE is long at 6.1 years
  • Highest lease expiry within 5 years is low at 17.6% which falls in 2024
  • Weighted average land lease expiry is long at 86.78 years

Debt Profile

  • Gearing ratio is moderate at 38.4%. Include perpetual securities, gearing is at 42.7%.
  • Cost of debt is low at 1.98%
  • Fixed rate debt % is low at 63%
  • Unsecured debt % is moderate at 77.3%
  • WADM is slightly long at 3.1 years
  • Highest debt maturity within 5 years is moderate at 31% which falls in 2024
  • Interest coverage ratio is low at 3.9 times
  • Perpetual securities over debts is moderate at 10%

Diversification Profile

  • Top geographical contribution is high at 65.8% 
  • Top property contribution is high at 30.1% 
  • Top 5 properties contribution is high at 76.7% 
  • Top tenant contribution is low at 8.9% 
  • Top 10 tenants contribution is slightly low at 36.7%

Key Financial Metrics

  • Property yield is low at 4.3% 
  • Management fees over distribution is high at 23.9% in which unitholders receive S$ 4.18 for every dollar paid 
  • Distribution on capital is low at 2.7%
  • Distribution margin is high at 57.2%
  • 0.9% of the past 12 months DPU is from asset disposal
  • 1.3% of the past 12 months DPU is from income support

Trends

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

Relative Valuation

  • P/NAV - Below average for 1y; Average for 3y and 5y
  • Dividend Yield - Average for 1y; Above average for 3y & 5y

Author's Opinion

 Favorable Less Favorable
High REIT Sponsor's ShareholdingLow Directors of REIT Manager's Shareholding
High REIT Manager's ShareholdingLow Fixed Rate Debt %
Long WALELow Interest Coverage Ratio
Well Spread Lease ExpiryHigh Top Geographical Contribution
Long Weighted Average Land Lease ExpiryHigh Top Property & Top 5 Properties Contributions
Low Cost of DebtLow Property Yield
Low Top Tenant ContributionNon-Competitive Management Fees
High Distribution MarginLow Distribution on Capital
Property Yield Uptrend 
Interest Coverage Ratio Uptrend
The property income and NPI have declined as compared to the previous quarters mainly due to divestment of 275 George Street. However, manager has distributed S$ 2mils capital gains in this 2H distribution to partially offset the drop in DPU. The recently acquired development of Blue & William would only be fruitful after mid 2023, so let's see would manager continue to distribute the capital gains to unitholders in the meantime.

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.

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