Keppel Reit

Keppel Reit: Nomura downgrades counter to REDUCE, TP of $1.34; KepCorp announced on 21 May that it is placing out 180mn units in KREIT at $1.555/unit, which will further reduce its direct stake in KREIT to c.5.2% from c.29% at the start of 2013. KREIT’s free float, on the other hand, will increase to c.48% from just c.24% at the start of 2013. While KepCorp's sale of its direct holdings in KREIT is in line with the group’s strategy of concentrating the property business under KPLD, which still owns c.46.3% of KREIT, it is perhaps also true that the current share price is perceived as a good level to take profits on most of its holdings. KREIT has outperformed benchmarks across the board YTD and trades at a yield spread of just 3.6pp (vs. its historical mean of 5.4pp and that of office REITs of 4.5pp) as well as P/B of 1.2x (vs. mean +1SD of 1.1x).