Keppel REIT

Keppel REIT: 2Q14 results broadly in-line. DPU fell 3.6% y/y to 1.9¢, while distributable income increased 0.7% to $53.2m. Property income was 15% higher at $47.3m while NPI increased by 21.5% to $39.2m, thanks to higher income from OFC, Prudential Tower and 50% interest in 8 Exhibition street, coupled with lower expenses. Aggregate leverage stood at 42.8% with all-in interest rate of 2.2%. Portfolio occupancy is 99.4% with WALE of 6.2 years. Income support on OFC will end 2017. Maybank-KE guides that KREIT has to maximize rent, which currently stands at $9.20 psf towards $12.60-12.70 to reach breakeven levels. Nonetheless, management guides rental upside to continue till 2015 on low vacancy levels, limited supply and moderately positive demand. Adjusted NAV stood at $1.38 at 30 Jun, translating to~0.9x P/B. Annualized yield 2Q14 yield is 5.9%. Latest broker ratings: Maybank-KE maintains Hold with TP of $1.32 UOB-KH maintains Buy with TP of $1.42