Keppel REIT (SGX: K71U) is a real estate investment trust (REIT) with a focus on commercial properties. Its portfolio currently consists of nine office assets located in Singapore and Australia. The REIT has ownership over properties such as Ocean Financial Centre, Bugis Junction Tower and partial stakes in other properties like One Raffles Quay.
There are two things about the REIT that investors may want to know about right now: its latest financial performance and valuation.
Here is a table showing important items from Keppel REIT’s financial performance for the second quarter of financial year ending 31 December 2018 (FY18).
Source: Keppel REIT’s Press Release
Overall, we see that most metrics came in stronger for the year, with the exception of distribution per unit (DPU), which was flat compared to last year.
The higher net property income was mainly due to an increase in one-off income, as well as higher property income from Bugis Junction Towers and Ocean Financial Centre. These were partially offset by lower income from 275 George Street.
Committed occupancy of the REIT’s Singapore portfolio was 99.9%, higher than Singapore’s core CBD average of 94.1%. Meanwhile, the committed occupancy of the Australia portfolio was 97.1%, also above Australia’s national CBD average occupancy of 90.1%.
In sum, it was a stable quarter for Keppel REIT with strong occupancy rates.
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows Keppel REIT’s PB ratio and distribution yield. It also shows the respective averages of the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
Source: SGX StockFacts (data as of 14 September 2018)
The above metrics show us a mixed picture. On one hand, Keppel REIT is trading at a discount to market average based on its low PB ratio. Yet, its distribution yield is much lower than the market average.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.