Keppel REIT

Keppel REIT: 4Q14 DPU fell 23.4% y/y to 1.51¢, at the lower end of estimates. This brought full year DPU to 7.23¢. Distributable income declined 16.5% to $45.8m. NPI fell 8.3% to $34.3m, while revenue dropped 10.9% to $42.3m, from the absence of contribution from Prudential Tower divested last year, while MBFC Tower 3 only contributed two-weeks of income. Occupancy stood at 99.3%, with a portfolio WALE of 6.1 years. Aggregate leverage stood at 43.3% with all in interest cost of 2.23%. Expect MBFC Tower 3 to contribute on a full year basis in FY15. Meanwhile, with about 12% of NLA up for renewal at MBFC Phase 1 (passing rents of $10 psf vs. $11.20 spot rents), there could be room for positive rental reversions. That said, the recovery in DPU could be diluted should KREIT pursue equity fundraising, given the 43.3% aggregate leverage is very near the 45% threshold under the new REIT framework by MAS. Additionally, investors should also note the income support for Ocean Financial Center is expiring in 2015. Keppel REIT is trading at 0.87x P/B, and offering an annualized 4Q14 yield of 4.9%