Keppel Reit 2H 2021 Results

 

Keppel Reit (SGX. K71U) announced its second half 2021 results today.

Most importantly for unitholders, dividend per unit (DPU) drops 1.7% to 2.88 cents relative to 2H 2020, but increases 1.6% Year-on-Year to 5.82 cents.

The DPU of 2.88 cents will be paid on 1 Mar 2022.

Despite higher net property income (+15.2%) and higher distributable income from operations (+4.6%), DPU still drops due to relatively high management fees and larger number of outstanding units from private placement in Feb 2021. Keppel Reit is indeed a big boys friendly Reit rather than being retail friendly.

Portfolio occupancy has dropped from 97.9% in Dec 2020 to 95.4% in Dec 2021, signifying the slight impact caused by WFH and hybrid working culture.

It is important to note that the acquisition of Blue and William, a Grade A office building under development in North Sydney, in Dec 2021 has not fully contributed to the distributable income of Keppel Reit. However, other more recent accretive acquisitions such as Keppel Bay Tower, Pinnacle Office Park in Sydney and Victoria Police Centre in Melbourne have already contributed to the distributable income.

The average cost of debt of Keppel Reit remains decent at 1.98% per annum and interest coverage ratio is fair at 3.9 times. Gearing remained decent at 38.4%. Only 5% of total borrowings are due for refinancing in FY 2022 so the higher interest rates should have only limited impact on its financing costs and hopefully will not impact its DPU much this year.

I believe Keppel Reit is only a decent pure office Reit for existing unitholders to hold but not attractive enough to entice new investors to initiate new position and accumulate because there are better Reits that offer greater reward to risk ratio.

I do like the high quality office properties owned by Keppel Reit though. The main reason I invested in Keppel Reit 6 years ago was to own a stake of Marina Bay Financial Centre and other Grade A office buildings for close to 6% dividend yield.

I currently own 10,351 shares of Keppel Reit in my SRS account at net average cost of $0.71 and will continue holding it for the long-term despite its lacklustre potential and growth under the highly paid mediocre management.

Thanks for reading. Stay safe and be strong as always. 

With love & peace, 

Qiongster