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Post Info TOPIC: K-REIT
KK


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K-REIT : DBS
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17-Apr-2007

The future growth will come

Leverage on rental growth in secondary locations. We continue to see bullish rental growth with tight vacancy and bullish rentals in the CBD spilling over to secondary locations. We have noted from property brokers that current asking rents for Keppel Towers is now at S$7.80, up by about 40% from S$5.50 within half a year.

1Q07 DPU below expectations,however, evident of lagged recovery. K-REIT delivered 1Q07 DPU of 1.77 cents, with modest growth of 0.6% sequentially compared to 4Q06. This translates into annualised DPU of 7.18 cents and yield of 2.24%, below our expectations. However, with 72% of NLA expected to be renewed from 2007 to 2010 (11% already renewed in 1Q07), we maintain the view that positive rent reversions from Keppel Towers and the remaining portfolio should flow through to distribution income eventually.

Billion dollar deal reflects rents lagging behind capital values. We highlight the recent landmark deal for office transaction with Capitaland unlocking value through the sale of Temasek Tower for S$1.039bn, or S$1,550 psf to Macquarie Global Property Advisors illustrating lagged effect of rental reversions. We understand from market sources that the yield based on the transaction is only about 2%, which implies unit capital values are pricing in strong growth in later years by market players. We find great disparity between our range of RNAV estimate for K-Reit based on i) Income method (FY08 NPI yield, 4.5% cap rate) which derives RNAV of S$2.04 per unit; ii) market comparison methodology (S$2,172 psf for Prudential Tower; S$1,550 psf for KT/GE and Bugis Junction) accordingly derives S$4.57 per unit which is consistent with this view.

Upgrade to Buy, raising DCF assumptions. With raised rental assumptions for Keppel Towers (44% NPI contribution) and terminal discount proxied by cap rate of 4.5%, we raise our DCF based target price to S$3.70 on the premise that K-REITs assets would continue to flush out under-rented space moving forward and rental growth to be reflected by flow through to distribution income. Upgrade to Buy.

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tfwee


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RE: K-REIT
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K-REIT announced a 23.6% growth in distribution income to unitholders to S$4.3m compared against pro forma figures, on higher rental income due to improved occupancies and higher rental rates achieved for new and renewed leases. DPU works out to be 1.77 cents, or 7.18 cents annualized.


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KK


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K-REIT : DBSVickers
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Extracts fm DBSVickers report dated 23-Jan-07,

Yield caps upside

4Q06 DPU in line with expectations. K-REIT delivered 4Q06 DPU of 1.76 cents and 4.63 cents YTD. This translates into annualised DPU of 6.76 cents and yield of 2.6%, in line with our estimates. Gross rental revenue of S$9.1m and S$23.9m YTD for FY06 grew 33.8% y-o-y and 29.2% y-o-y respectively, mainly attributed to positive reversions from renewals, new leases and higher occupancy. Net property income grew 49.1%, as a result of flow through from higher rentals. Occupancy for the portfolio remains healthy on the back of tight supply with 100% committed occupancy as at FY06 and high retention rate of 99.5%. 4Q06 and YTDFY06 distributable income grew by 105.3% and 98.4% respectively.

Lagged effect of positive rental reversions evident. We continue to view K-REIT as a prime beneficiary for spillover demand from the prime CBD. This is due to tight vacancy on the back of limited supply coming into the market in the next three years. Based on our RNAV estimate, KREIT remains undervalued from an asset perspective. However the disparity between our RNAV estimate of S$3.08 and DCF valuation is evident, despite already imputing acquisitions into our calculation. This is due to K-REIT’s assets currently yielding lower than the yield that market transactions imply based on capital value of transactions. Lagged effect of positive rental reversions is evident, and we have noted that average gross rents reached only S$3.80 spf as of Dec 06, in contrast with prime office rentals at S$7.81 psf as of FY06, according to CBRE. However, moving forward, K-REIT is expected to benefit from positive rental reversions with 53% of NLA due for renewal in the next three years.

TP upgraded to S$ 2.63, Maintain Hold. We have upgraded our DCFbased target price after assuming S$1.3bn of acquisitions by end of 2008 to factor in growth prospects from possible acquisition pipeline. With lagged effect of DPU growth as discussed, despite growth prospects remain positive in a three-year investment frame, at current levels K-REIT’s distribution yield currently is likely to cap further upside in unit price. Therefore we are maintaining our Hold recommendation and target price of S$ 2.63 for K-REIT based on DCF valuation.



-- Edited by KK at 22:23, 2007-01-23

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KK


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K-REIT
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BT, Published January 23, 2007

K-Reit exceeds income forecast

K-REIT Asia, the real estate investment trust vehicle of Keppel Land, has reported a distributable income of $11.2 million for the period from April 26 to Dec 31, 2006. This exceeds its forecast by 23.9 per cent.

The income relates to this period as K-Reit was established on Nov 28, 2005, but acquisition of its properties was completed on April 26.

The Reit manager, K-Reit Asia Management, also reported that net property income for the period of $16.8 million exceeds its forecast by 11.3 per cent.

For the period from July 1 to Dec 31, 2006, K-Reit Asia will pay out 3.47 cents per unit on Feb 28. This is in addition to the 1.16 cents per unit already paid on Aug 28 last year for the period April 26 to June 30.

The total distribution payout for the period from April 26 to Dec 31, 2006 amounts to 4.63 cents, which works out to an annualised distribution per unit (DPU) of 6.76 cents. This is 24.5 per cent above forecast DPU of 5.43 cents for 2006.

The Reit manager attributed the improvement to higher rentals and full occupancies, in particular its properties Keppel Towers and Prudential Tower. Other properties that form K-Reit's $677 million portfolio include GE Tower and Bugis Junction Towers.

For Prudential Tower, net property income for the period was $3.17 million, 61.2 per cent higher than the same period a year earlier, calculated on a pro forma basis. Net property income for Keppel Towers and GE Tower combined was $7.82 million, 44.8 per cent higher year-on-year, while for Bugis Junction Towers, net property income was $5.82 million, 47 per cent higher year-on-year, both also on a pro forma basis.

The Reit manager said it is confident that K-Reit will deliver a forecast DPU consistent with that achieved in the current period.

K-Reit ended yesterday at $2.62 per unit, up 3 cents.

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KK


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K-REIT : DBSVickers
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Extracts fm DBSVickers Report dated 19-Oct-06,

Well positioned for growth

3Q results above expectations. K-Reit delivered DPU of 1.71 cents for 3Q06 and 2.87 cents YTD since listing which translates to an annualized yield of 6.63 cents which is above expectations. Gross rental revenue rose 26.3% to S$14.8m YoY mainly due to positive operatingn performance with the portfolio achieving committed occupancy near 100% and positive rental reversions with renewals signed at 17% above preceding rents as well as high tenant retention rate of 99.3%. In terms of costs, property expenses were 8.1% lower at S$4.2m due to lower marketing expenses and maintenance expenses, partly offset by higher property tax and property management fees on higher rental revenue. Borrowing costs were maintained. Distributable income rose by 94.3% YoY to S$6.9m.

Operating data reflects the tight supply for broad office market. The high retention rate by K-REIT’s portfolio at 99.3% as well as a rise in occupancy rate to close to 100% levels is a strong indicator of the tight supply in the office market presently. As concentration of office supply in Singapore is in the CBD with Grade A vacancy at only 2.7%, the supply situation is looking increasingly tight with several aging office buildings in the CBD up for redevelopment including UIC building, 1 Shenton Way, Natwest Centre, Straits Trading Building and Ocean Building. These redevelopment projects are expected to remove another 1.5m sf or 7.5% of CBD office stock from the market in phases over the next few years. K-REIT will be well-positioned for positive rental reversions moving forward with 60% of NLA up for expiry before BFC comes on stream in 2010.

Target AUM of S$2bn. K-REIT has targeted for an AUM size of S$2bn, although no timeline was revealed. With our projected yield of 3.5% for K-REIT and prime office yield at 4.7% according to CBRE, K-REIT is well-positioned for yield accretive acquisitions.

Buy recommendation and target price of S$2.45 maintained. K-REIT’s 3Q operating data supports our premise that transactions in the physical market suggest that market players are pricing in strong growth in rental reversions on a forward basis which implies that KREIT’s portfolio remains undervalued from a market comparison perspective. Maintain BUY, with target price of S$2.45 based on DCF valuation and backed by our RNAV estimate of S$2.42 per unit for KREIT, for which we have factored in rising trend of office capital values.



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KK


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K-REIT
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BT, Published October 19, 2006

K-Reit reports $6.9m distributable income

K-REIT Asia, a property trust owned by Singapore developer Keppel Land Ltd, said that distributable income for the period from Apr 26 to Sept 30 was 21.3 per cent higher than its own forecast.

Distributable income for the five-month period was $6.9 million, the trust's manager said in a statement to the Singapore Exchange (SGX) yesterday, better than its forecast for the period.

Economic growth of as much as 7.5 per cent this year is boosting demand for prime office space, helping rents recover from their lowest in a decade. K-Reit's portfolio of properties includes Keppel Towers, GE Tower and Bugis Junction Towers, as well as a 44 per cent stake in Prudential Tower.

'With property funds hot on the heels of office assets, we have witnessed office sales transactions setting new highs,' DBS Vickers Securities (Singapore) Pte, said in a report last Friday. - Bloomberg



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KK


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K-REIT : DBSVickers
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Extracts fm DBSVickers Report dated 21-Jul-06,

Testament to strong office fundamentals

Strong property performance. Distribution income for the period from 26 April to 30 June 2006 came in 13.1% above our expectations at S$2.8m, with DPU of 1.16 cents for the same period translating into an annualized DPU of 6.42 cents. With weighted average occupancy of 89% as of 30 September 05, the portfolio‘s 98.4% committed occupancy as of 1H06 is testament of the strong fundamentals in the Singapore office market. Distribution for FY06 should be stable with only 3.5% of NLA up for renewal for FY06. Tenant retention rate was also high at 99%, with 7,922 sm of space renewed for 1H06. 23.5% of leases expiring in FY07 will be able to capture the higher office rents in the next rent renewal cycle.

Outlook remains robust. The Singapore office market fundamentals remain robust with One Raffles Quay consisting 1.3m sf of new supply coming on stream near 100% pre-committed, while the next major supply coming on stream from BFC is expected only in FY09/10. According to CBRE Data for 1H06, Grade A office vacancy has dipped further from 4.9% as of 1Q06 to 2.7% as of 2Q06. Average prime office rentals continued to edge up from S$5.60 to S$6.00, up 7% q-o-q and 15% YTD.

Raised target price slightly. As such, we adjusted our DCF valuation slightly from S$1.47 to S$1.48. Although K-REIT announced a portfolio target of S$2bn, we have conservatively not built in any acquisition assumptions in our valuation. We have a BUY rating for K-REIT, with a target price of S$1.48.



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KK


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K-REIT : UOB Kay Hian
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Extracts fm UOB Kay Hian Report dated 21-Jul-06,

Distributable income exceeds forecast by 17.5%

K-Reit announced its first interim results for the period from 26 April to 30 Jun yesterday.



  • K-Reit achieved a distributable income of S$2.8m, 17.5% higher than forecast. This is due to higher rental income from its property portfolio as a result of higher occupancy and achieved rental rates, as well as lower property expenses due to improved operational efficiency.
  • Unit holders will be entitled to a distribution per unit (DPU) of 1.16 cents for the period of 26 April to 30 June 06 which works out to an annualised DPU of 6.42 cents, higher than the forecast DPU of 5.43 cents for 2006.
  • This gives an annualized yield of 4.98%, higher than the forecast 4.21%
  • Committed occupancy of K-Reit Asia’s initial portfolio reached 98.4% as of end June 06 as compared to 89% as at Sept 05.
  • 5year fixed rate term loans of $190.1m have been secured at an interest rate of 3.9% pa.
  • With an initial portfolio of four office buildings in Singapore (Prudential Tower, Keppel Towers and GE Tower, and Bugis Junction Towers), it is targeting to grow its current portfolio size of $630.7 million to about $2 billion within the next few years and will pursue selective acquisitions of potential prime commercial properties in Singapore and the region.

K-Reit is well positioned to ride on a rising office market. Limited new supply over the next few years and shrinkage in existing inventory has resulted in strong demand for prime office space. Sustained growth in demand for quality office space and potential increase in rental will benefit K-Reit. With a healthy lease expiry over the next few years, it is in good stead to ride the upward rental cycle. A total of 37.4% total lettable area will be up for renewal in 2007 and 2008, while another 23.6% will be due in 2009. Nonetheless, its annualised yield of 4.98% is still comparatively lower than other Singapore reits and it is still playing catch up.

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KK


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K-REIT
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K-REIT reports maiden profit of S$2.8m, outstripping its own forecast

K-REIT has reported a maiden distribution income of nearly S$2.8m for the period from April 26 to June 30. This is 17.5 percent higher than its own forecast and it works out to 1.16 cents per unit. Property income for the period was booked at S$4.3m, or 8.7 percent higher than forecast.

K-REIT attributed the better than forecast performance to higher rental income as a result of higher occupancy and rental rates. It says its properties are poised to enjoy further rental upside as existing leases come up for renewal and new leases are signed.

This is K-REIT's first set of results since its listing on April 28. It currently owns Keppel Towers, GE Tower and Bugis Junction and about 44 percent of Prudential Tower. - CNA /dt



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KK


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BT, Published May 18, 2006

K-Reit Asia secures $190m fixed-rate mortgage loans

K-REIT Asia Management Ltd yesterday announced that it has secured two fixed-rate mortgage loans totalling about $190 million from Blossom Assets, a special purpose vehicle incorporated in Singapore.

The loans consist of two mortgages on the properties and assets of K-Reit Asia, with one tranche of about $160 million and the other about $30 million. The loans will be used by K-Reit to refinance a bridging loan previously used to purchase its four buildings - Keppel Towers and GE Tower, Bugis Junction Towers and strata title units in Prudential Tower. Blossom Assets Ltd is using the proceeds of its rated $190 million secured floating rate notes issued under its $3 billion multicurrency secured medium-term note programme to provide the loans to K-Reit Asia.

The loans are not expected to have any material impact on the distribution per unit of K-Reit Asia for its first financial period from Nov 28, 2005, to Dec 31, 2006. Deloitte & Touche Corporate Finance is the financial adviser for the introduction of the units of K-Reit Asia to the main board of the SGX-ST.



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KK


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DBS released a report today. Extracts,

Initial portfolio of 4 properties. K-REIT will be made up of 4 office buildings (Prudential Tower, Bugis Junction Towers, Keppel Towers and GE Tower) with an initial asset size of S$630.7m and weighted average occupancy of 89% as of 30 September 2005. K-REIT shares will be distributed to Keppel Land shareholders through a 1-for-5 distribution in specie in which sponsor Keppel Land will retain 40% of the units and Keppel Corp to take up 32% of the units. The listing and trading of K-REIT is expected to commence on 28 April 2006.

Office market update. Recovery of prime office rentals in Singapore has commenced since 4Q04 with growth of 18.2% YoY in 2005, compared to 10% YoY in 2004. The URA office index also saw an increase of 12.7% in 2005 compared to 3.5% in 2004. According to CBRE, prime rents are pojected to rise 25% in 2006. This is on the back of strong leasing momentum expected for 2006 and limited supply for the next three years.

Valuation. Our DCF valuation of K-REIT works out to be S$1.47. If we impute an acquisition assumption of S$300m each in FY07 and FY08 at yield of 5%, this will result in an upgrade of DCF valuation to S$1.52. Until the acquisition pipeline becomes clearer, we peg our target price of K-REIT based on DCF valuation of S$1.47. Our yield-spread model which imputes a 4.2% yield implies value of S$1.34 and S$1.43 based on FY06 and FY07 earnings respectively.

My Comments - You can get more info at K-REIT site. Read the Circular and Introductory Document.



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