Analysts from CGS-CIMB Research and Maybank Kim Eng are mixed on Keppel REIT’s 1QFY2021 ended March business update which came out on April 21.
CGA-CIMB analyst Lock Mun Yee positively views the REIT’s performance, highlighting that new acquisitions and interest cost savings boosted its distributable income by 22% y-o-y to $51.6 million.
Despite portfolio committed occupancy slipping q-o-q to 96.5%, Lock points out that the REIT signed or renewed leases for some 309,800 square feet of space in the 1QFY2021 at an average rental uplift of about 10.7%.
She believes rental reversions could remain slightly positive for FY2021 given Keppel REIT’s low expiring rental level (average of $9.98 per square foot).
In addition, she is positive on the REIT’s ‘robust balance sheet’, with gearing at 35.2% at end of the 1QFY2021.
“With no major refinancing needs in FY2021, KREIT continues to be in a strong position to continue to evaluate accretive inorganic growth opportunities,” she points out.
She maintains her ‘buy’ call for Keppel REIT with an unchanged target price of $1.29.
Meanwhile, Maybank Kim Eng analyst Chua Su Tye believes further headwinds lie ahead for the REIT after its ‘weak’ 1QFY2021.
SEE:Analysts mixed on Keppel DC REIT's 1Q results
He has retained his ‘sell’ rating with an unchanged target price of 95 cents.
“We continue to see headwinds for leasing out vacancies and at pressured rents, given rising tenant downsizing risk, especially by financial institution tenants (32% of its NLA), amid increasing work from home (WFH) entrenchment,” he says.
He points out that the REIT's rental reversion, while positive at 10.7% for the 1QFY2021, represents a further moderation from +12.7% in the 4QFY2020 and +15.0% in the 3QFY2020.
In addition, average weighted signing rents of $10.64 per square foot per month of 3.4% represents a bigger decline q-o-q, compared to the 0.1% decline in the 4QFY2020.
“Management sees a slow pick-up in demand in 2H21 against the recovering economic backdrop,” he adds.
He is also bearish on the lower portfolio occupancy, viewing that the slower demand for its Australian assets will continue through the near term.
As at 3.35pm, units in Keppel REIT are trading flat at $1.24.
