Keppel Reit

Keppel Reit: 1Q14 DPU was in-line and unchanged at 1.97¢, while distributable income was 5.5% higher y/y at $55.1m. Revenue (+12.9%) and NPI (+14.7%) came in at $46.8m and $39.5m respectively, with increases coming from OFC, Prudential Tower and contributions from the 50% interest in 8 Exhibition Street acquired in 1 Aug’13. Portfolio occupancy was 99.8%. WALE was 6.4 years. High aggregate leverage of 42.4%, plus the expected MBFC Phase 2 acquisition poses equity dilution threats, which CS thinks is why share price has been week YTD Deutsche expects FY15e DPUs to decline 14% y/y owing to the expiry of income support from OFC, which is why they value KREIT as fair. In addition, CS believes much of SG optimism on rent growth has been priced in. NAV was $1.37 translates to P/B of 0.85x. Annualized 1Q14 yield is 7%. Latest broker ratings as follows: Deutsche: Hold, TP $1.28 CS: Neutral, TP $1.30