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Keppel REIT (KREIT SP)
Rents Accelerating
Sound fundamentals, favourable risk-reward
KREIT’s 1H22 DPU rose 1.2% YoY/3.1% HoH, as the Keppel Bay Tower acquisition helped offset its divestment of 275 George St. (Brisbane) in Jul 2021 and lower contribution from 8 Chifley Square (Sydney). Fundamentals remain sound, backed by tailwinds in office demand, improving occupancy and accelerating rents.
Leasing velocity is strong, and we raised DPUs by 3% to factor in a stronger rental recovery and lower interest costs. Riskreward is favourable at 5.5% FY23E yield, with limited downside from interest rate and cost sensitivities. We raise our DDM-based TP (COE: 6.6%, LTG: 2.0%) to SGD1.25 from SGD1.20. Reiterate BUY.
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Mapletree Industrial Trust (MINT SP)
Data-driven Growth
Strong 1Q23, maintain BUY
MINT’s 1Q23 DPU rose c.4% YoY/flat QoQ, driven by rising US data centre contributions, now at c.51% of AUM. The performance was in line with consensus and slightly above our estimates; we raise DPUs by 1-2% on stronger occupancies and rents, while our DDM-based TP stays at SGD3.00 (COE: 6.6%, LTG: 2.0%).
Growth headwinds from inflationary pressures and rising interest rates are partly offset by retained capital distributions, and a strong balance sheet. Valuations are undemanding at c.5% yield, backed by improving fundamentals from better occupancies, recovering industrial rents, and higher DPU visibility from its rising data centre tenancies. BUY.
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ESR-LOGOS REIT
Sized up for growth
■ In our post-merger forecasts for ELOG, FY22F DPU is 3 Scts, with potential for growth accelerating from FY24F via capital recycling and asset enhancement.
■ At 7.3% FY22F DPU yield, ELOG is attractively valued vs. industrial SREITs’ average of c.6%. Asset recycling, M&A and trading liquidity are key catalysts.
■ Benefits of transformative merger are still underappreciated, in our view. We reiterate our Add rating with a higher DDM-based TP of S$0.51. |
OUE Commercial REIT
Riding recovery and demand-supply tailwinds
■ OUECT’s 1H22 DPU of 1.08 Scts came in below at 39.9% of our FY22F.
■ Strong recovery in the hospitality and retail portfolio, while healthier office occupancy and limited supply give OUECT the ability to drive rents.
■ Reiterate a Hold rating with a lower DDM-based TP of S$0.39.
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Mapletree Industrial Trust (MINT SP)
1QFY23: Weathering Headwinds From Higher Inflation And Interest Rates
1QFY23 DPU grew 4.2% yoy, driven by the acquisition of 29 US data centres. MINT achieved higher portfolio occupancy and positive rent reversion. MINT is a resilient industrial REIT due to asset type and geographical diversification.
Our existing DPU forecast is unchanged as we have already factored in the higher cost of debt and electricity tariffs. MINT provides FY23 distribution yield of 5.1%, which is in line with peers (DCREIT: 5.1%; KDCREIT: 5.1%). Maintain BUY. Target price: S$3.36.
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Keppel REIT (KREIT SP)
1H22: Prime Beneficiary As Vacancy Within Core CBD Tightens
KREIT is the prime beneficiary of office upcycle within core CBD. It achieved positive rental reversion of 7.5% in 2Q22 with rents rising more rapidly in May and June.
Portfolio committed occupancy improved 0.4ppt qoq to 95.5%. It is in advanced negotiation with a few prospective tenants. If successfully signed, portfolio occupancy would improve 1.5ppt to 97%. KREIT provides 2022 distribution yield of 5.4% (CICT: 5.4% and Suntec: 6.5%). Maintain BUY with target price of S$1.41.
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