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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.


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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