Despite Keppel REIT’s positive set of results for 1HFY2021 ended June 30, analysts have remained divided on their recommendation for the office REIT.
Among those in favour of Keppel REIT is CGS-CIMB Research.
“With no major refinancing needs in FY2021 and better debt headroom, Keppel REIT continues to be in a strong position to continue to evaluate accretive inorganic growth opportunities,” CGS-CIMB analysts Long Mun Yee and Eing Kar Mei write in a note dated July 28.
See also: Keppel REIT’s 1H DPU rose 5% y-o-y to 2.94 cents
CGS-CIMB Research has maintained its “add” rating for the REIT with an unchanged target price of $1.29.
DBS Group Research, too, is among those who favour Keppel REIT.
“We believe [Keppel [REIT]’s best-in-class office portfolio is well positioned to benefit from potential recovery in a very tight net supply,” DBS analysts Rachel Tan and Derek Tan write in a July 28 report.
The brokerage has retained its “buy” recommendation for the stock with an unchanged target price of $1.40.
However, Maybank Kim Eng is among the pessimists.
“We continue to see headwinds for leasing out vacancies and at pressured rents, given tenant downsizing risk, especially by financial institution tenants, amid increasing [work from home] entrenchment,” Maybank KE analyst Chua Su Tye writes in a note dated July 28.
Maybank KE has kept its “sell” call for the REIT with an unchanged target price of 95 cents.
In tandem with the mixed recommendations, analysts are also divided on Keppel REIT's earnings ahead.
CGS-CIMB has lowered its FY2021-FY2023 distribution per unit (DPU) estimates by 4.8%-7.3%.
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This is to factor in income vacuum from the divestment of a 50% stake in 275 George St, says the brokerage.
“While we believe lease reversions could remain slightly positive for FY21F given the low expiring rental level, the ability to backfill vacant spaces will be key and potential portfolio frictional vacancy may drag on earnings outlook,” say Lock and Eing.
Maybank KE, too, has lowered its FY2022-FY2023 DPU forecasts by 2% for the same reason.
However, DBS has raised its FY2021 DPU estimates by 0.7% to factor in the recent asset acquisition and divestments.
It has also forecast core DPU to grow at a compounded annual rate of about 3% over the year two years.
As at 12.03 pm, Keppel REIT was down 2 cents 1.7% at $1.18 with 1.6 million units changed hands.
