K-REIT Asia

K-REIT Asia: Announced 2Q11 results, which were in-line.
Ppty Income at $18.1m, -22.2% yoy and flat qoq, while DPU at 1.93c, +17.7% yoy and flat qoq. Strong bottom-line due largely to higher interest income and results from recently acquired 1/3 interest in MBFC phase1, which saw contributions from associated Co’s jump 224.1% to $14.5m

During period, REIT’s occupancy rate increased 1% qoq to 97.9 %, with its SG property portfolio occupacny at 98.6% vs SG’s CBD occupancy rate of 94.6%, while all rent reviews due in 2011 have been completed and has generally stayed on an uptrend as landlords benchmark rentals to higher rents at new or uncompleted dev.

We note that at current price, grp trades at 0.88x P/B with annualized DPU of 5.6%, while Leverage ratio stood at 39.2% vs Suntec REIT (0.84x P/B, 6.37% yield, 39.1x% Leverage), CapitaCommercial Trust (0.93x P/B, 5.2% yield, 29% Leverage) and FCT (0.43x P/B, 6.8% yield, 39.7% Leverage). Grp’s weighted average lease term to expiry for the entire portfolio and the top ten tenants were healthy at 7.2 yrs and 8.51 yrs respectively.

Going forward, grp remains positive on outlook, tipping healthy economic outlook for SG and Aus to drive growth, and will focus on active asset mgt, retain existing tenants Grp also announced the purchase of an office building in Aus for $154.4m, its 3rd office acquisition in Aus. BNP Paribas and Macquarie maintains O/P with $1.60 TP and CLSA maintains Buy with $1.65 TP.