Keppel REIT's Outlook Is Not Favorable
Key Highlights:
Keppel REIT's (SGX:K71U) 3Q19 DPU grew 2.9% to 1.4 cents
The annualised yield and price to book ratio are 4.5% and 0.91 respectively
1. Dividends
Net property income and distribution per unit grew 17.6% and 2.9% to $33.2m and 1.4 cents, respectively. The increase was mainly due to
higher rental contribution from Ocean Financial Centre
full quarter contributions from T Tower, Seoul
However the distributable income is also impacted by
reduced takings from Bugis Junction
weaker AUD
absence of rental support for MBFC Tower 3
The annualised yield is 4.5%. It is currently trading at historical low yield.
2. Portfolio
Portfolio occupancy remains stable at 98.9%. 11.9% of its leases will be up for renewal in 2020. Portfolio leverage went up slightly to 38.9%. The interest cost is 2.82%, 91% of the loans are on fixed rates and $637m of loans are up for refinancing next year. It is currently trading at a price to book ratio of 0.91.
3. Growth catalyst
The REIT is the midst to divest the Bugis Junction Towers for $547.5m. The proceeds will be used for share buy-backs and potential acquisitions.
Summary
The increase in DPU this quarter was mainly due to the unit buybacks. The DPU has been trending downwards over the years and the REIT has a low dividend ratings. Thus, it does not fit our criteria to be included in our portfolio.
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