CGS-CIMB upgraded Keppel REIT to Add from Hold after first-quarter results were in line with expectations and showed positive rental reversions.
It noted that the first-quarter dividend per unit (DPU) of 1.42 Singapore cents made up around 25 percent of its full-year forecast.
“During the quarter, Bugis Junction Tower and 8 Exhibition St in Australia delivered better results year-on-year and helped offset weaker earnings from 275 George St and other Singapore properties,” it said in a note on Wednesday, noting portfolio occupancy was “fairly stable” from the previous quarter, coming in at 99.4 percent.
Singapore leases, which were 84 percent of lease expiries, were re-contracted at an average S$10.05 per square foot, or a positive reversion of 3.6 percent, the note said, adding that Keppel REIT guided that upcoming expiring rents ranged from S$8.50-S$12.00 psf.
“We maintain our expectation of a 15 percent year-on-year pick-up in spot rents for 2018, and anticipate further positive rental reversions
when these leases are renewed. This should continue to underpin its DPU growth going forward,” CGS-CIMB said.
But it kept its 2018-20 DPU forecasts and S$1.34 target price unchanged, saying the stock’s recent sharp selloff was the reason for the upgrade to Add.
“With the sustained office market recovery, there could potentially be upside risks to our estimates which will further catalyse KREIT’s share price performance,” it said.
The unit ended Thursday up 2.50 percent at S$1.23.