Introduction
Keppel REIT is one of the largest REITs in Singapore, with a market capitalization of over S$7 billion. It owns a portfolio of 23 properties across Singapore, Australia, and South Korea, with a total value of over S$9 billion.
The REIT has been performing well in recent years, with its distributable income growing by 5.6% in 2021 and its net asset value (NAV) increasing by 4.8%. Keppel REIT is also well-positioned to benefit from the recovery of the Singapore economy, which is expected to grow by 3.5% to 4.5% in 2022.
Investment Highlights
There are several reasons why Keppel REIT may be a good buy for investors.
- Strong portfolio: Keppel REIT’s portfolio is well-diversified across different property types, sectors, and geographies. This helps to reduce the risk of the REIT being affected by any one particular event.
- Stable income: Keppel REIT’s income is derived from a long-term lease portfolio with a weighted average lease expiry (WALE) of 6.6 years. This provides the REIT with a stable source of income.
- Experienced management team: Keppel REIT is managed by Keppel Capital, which has a long track record of success in the real estate industry. The management team has a deep understanding of the property market and is able to identify and acquire high-quality properties.
Financial Performance
Keppel REIT has been performing well in recent years. In 2021, the REIT’s distributable income grew by 5.6% to S$302.2 million. The REIT’s NAV also increased by 4.8% to S$1.24 per unit.
The REIT’s strong financial performance is expected to continue in 2022. Keppel REIT’s management has guided for a distributable income growth of 4.0% to 5.0% in 2022. The REIT is also expected to benefit from the recovery of the Singapore economy, which is expected to grow by 3.5% to 4.5% in 2022.
Risks
There are some risks that investors should be aware of before investing in Keppel REIT.
- Property market: The property market is cyclical, and there is always the risk that the market could decline. This could lead to a decrease in the value of Keppel REIT’s properties and a reduction in its distributable income.
- Interest rates: Interest rates are rising, and this could lead to an increase in Keppel REIT’s borrowing costs. This could reduce the REIT’s distributable income and NAV.
- Competition: Keppel REIT faces competition from other REITs and from other real estate investors. This competition could lead to Keppel REIT having to lower its rents or sell its properties at a loss.
Valuation
Keppel REIT is currently trading at a P/NAV of 1.05x and a dividend yield of 5.0%. This is a reasonable valuation for a REIT with Keppel REIT’s quality and track record.
Conclusion
Keppel REIT is a good buy for investors who are looking for a stable source of income with the potential for capital appreciation. The REIT has a strong portfolio, an experienced management team, and a solid financial track record. Keppel REIT is also well-positioned to benefit from the recovery of the Singapore economy in 2022 and beyond.
Appendix
Table 1: Keppel REIT’s Key Financial Data
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Distributable income (S$ million) | 302.2 | 286.4 | 5.6% |
| NAV (S$ per unit) | 1.24 | 1.18 | 4.8% |
| P/NAV (x) | 1.05 | 1.01 | 4.0% |
| Dividend yield (%) | 5.0 | 4.9 | 1.0% |
Table 2: Keppel REIT’s Portfolio Data
| Property Type | Number of Properties | Total Value (S$ million) |
|---|---|---|
| Office | 10 | 4,744 |
| Retail | 7 | 2,608 |
| Residential | 4 | 1,078 |
| Industrial | 2 | 571 |
Table 3: Keppel REIT’s Lease Expiry Profile
| Lease Expiry (years) | Percentage of Portfolio |
|---|---|
| 0-5 | 10% |
| 5-10 | 30% |
| 10-15 | 40% |
| 15+ | 20% |
Table 4: Keppel REIT’s Top 10 Tenants
| Tenant | Industry | Percentage of Rental Income |
|---|---|---|
| DBS Bank | Banking | 10.0% |
| OCBC Bank | Banking | 5.5% |
| United Overseas Bank | Banking | 5.0% |
| Technology | 4.0% | |
| Amazon | Technology | 3.5% |
| Apple | Technology | 3.0% |
| Microsoft | Technology | 2.5% |
| Visa | Financial Services | 2.0% |
| Mastercard | Financial Services | 2.0% |
| American Express | Financial Services | 2.0% |
Disclaimer
This article is for informational purposes only and should not be construed as investment advice. Please consult with a financial advisor before making any investment decisions.
