Keppel REIT

Keppel REIT: 3Q14 DPU was lower by 6.1% y/y at 1.85¢, while distributable income fell 3.8% to $52m. Property income increased 8.4% to $47.6m, while NPI increased 12.4% to $38.5m, mainly due to better performance from OFC and contributions from the 50% interest in 8 Exhibition Street. The DPU shortfall was caused by weaker-than-expected total contributions from its one third stakes from One Raffles Quay and MBFC T1. Meanwhile, positive rental reversions of 32.3% were achieved in the quarter. Occupancy rate remained healthy at 99.3%. WALE stood at 6.2 years. Aggregate leverage inched lower by 0.7ppt to 42.8%. Recapping recent events, the 92.8% interest in Prudential Tower was divested for $512m on 26 Sep, while the proposed acquisition of a third of MBFC T3 for $1.25m was announced on 18 Sep. Market watchers are expecting 4Q14 DPU to worse due to the absence of income from Prudential Tower and the private placement raised ahead of the MBFC T3 acquisition, scheduled for completion in late 2014 NAV at end of Sep was $1.40, translating to 0.84x P/B. Keppel is currently trading at 0.62x annualized 3Q14 yield. Latest broker ratings: UOB KH maintains Buy with TP of $1.12 BNP Paribas maintains Buy with TP of $1.43 Deutsche maintains Hold with TP of $1.12 Daiwa maintains Hold with TP of $1.19