2 reasons market watchers are cautious over Keppel REIT

SINGAPORE (July 20): Keppel REIT Management Limited, the manager of Keppel Real Estate Investment Trust (Keppel REIT) reported a healthy distributable income of $52.5 million for 2QFY016, but market watchers are not rushing to recommend buying the stock.

Maybank Kim Eng has maintained its hold recommendation for Keppel REIT, with a higher target price of $1.05 from $0.97. Likewise, Religare Institutional Research has a hold recommendation with an unchanged target price of $1.02.

For 2QFY2016, revenue fell 5.6% to $40.6 million and distributable income declined 4.2% to $52.5 million, following the divestment of 77 King Street earlier in the year. The property accounted for 6.4% of the REIT’s net property income (NPI) in 2QFY2015. However, Religare’s Pang Ti Wee, noted that the divestment was mitigated by the 4.2% gain in NPI from Ocean Financial Centre and the capital distribution of $5 million. “Excluding this, distribution income would have dropped further by 13%,” he writes in a note on Wednesday.

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