Saturday, 19 April 2014

Keppel REIT Breakout

On the last trading day before Good Friday Holiday, Keppel Reits' price jumped from 1.19 to 1.24 ( or 3.7% higher) with elevated trading volume, forming a clear and strong break out. 



Before the breakout, the counter has seen price weakness together with subdued trading volume ever since Oct 13, when Temasek sold off its shares. (See previous post : Keppel Reit Dumped by Temasek, Should You?However, the downside is limited at 1.10, since there is no fundamental issue with this counter.

Technically, the price has jumped above 200d MA, next few weeks we shall see if this line can turn into new support. 



Last week, Keppel Reits also released its last Q's results, as steady as expected: DPU maintained, Top and bottom line kept up; refinancing under management. The only concern is that the current all-in-cost is 2.18%, which will be under pressure when interest rate is set to rise in 2015 or 2016. 

However, that does not necessarily translate into poorer results, as the top line (rental income) shall improve too if the future interest rate rise is in tandem with improving economic condition. Besides, the planned divestment of Prudential Tower and acquisition of MBFC Tower 3 is supposed to be positive catalyst too.

At the price of 1.24, the current yield is about 6.4%. The counter is still arguably relatively cheaper than some of its peers(See following chart from OCBC: )

I have collected a few lots of K-Reits some time ago. The break-even price is way below the current price. I will maintain my holdings, mainly because of its future stable pay-out and prospects, not because this price break-out, probably is due to big fund movement.

Results Review From UOB Kay Hian:
Keppel REIT- 1Q14: Asset sales likely to fund MBFC acquisition (KREIT SP/BUY/S$1.17/Target: S$1.46) 

FY14F DPU Yld (%): 6.9 

FY15F DPU Yld (%): 6.2 

Results in line with expectations. Keppel REIT (KREIT) reported 1Q14 DPU of 1.97 cents/share (unchanged yoy and qoq) on full occupancy, completion of acquisitions and 

developments, and lower finance costs. This was partially offset by dilution from the placements of 40m shares in 1Q13 and 95m shares in 3Q13. Results were in line with 
expectations, with 1Q14 DPU representing 24.6% of our full-year forecast. 

Maintain BUY and target price of S$1.46, based on DDM (required rate of return: 7.1%, terminal growth: 2.2%). 

2 comments:

  1. Hi Richard,

    Is this a "BUY" stock for you?

    ReplyDelete
  2. Hi, was tied up with work these days. In my opinion, Keppel Reit is not in the top Buy among S-Reits. I will wait and see if they can hold up DPU. Among office Reits, Frasers Commercial may be better. I am not selling Keppel either since its rising trend still intact.

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...