3 Reasons Why Investors Love Keppel REIT


Keppel REIT is one of Asia's leading commercial REITs with properties in prime locations in pan-Asia and it is Singapore's 2nd largest commercial REIT, just behind Capitaland Commercial Trust. Keppel REIT was first listed in 2006 with only $600 million worth of assets and has slowly increased its portfolio size over the years through various acquisitions and divestments to a current worth of $7.9 billion. Keppel REIT is extremely popular among dividend investors in Singapore and it is known for being a high-quality REIT with sustainable dividends. Also, Keppel REIT is strongly sponsored by Keppel Land Limited, one of Asia's largest property companies with a total asset valued at $14.2 billion. A strong sponsor such as Keppel Land Limited provides assurance to investors and provides financial stability to Keppel REIT. Keppel REIT's share price has decreased slightly from $1.25 to the current share price of $1.10 due to the COVID-19 pandemic. It is one of the few Singapore REITs whose share price has only been slightly affected by the COVID-19 pandemic. This reflects investors' confidence in Keppel REIT's performance even in tough economic times. Here are 3 reasons why Keppel REIT is so highly sought after by investors. 



1. High-Quality Dividends

Keppel REIT has a 15-year consistent dividend history and is one of the oldest REITs in Singapore. They have been paying out dividends to shareholders without fail since 2006. Investors can be more or less assured that they will be receiving dividends at regular intervals. The average past 5-year dividend yield for Keppel REIT is 5.25% which is comparable to the average blue-chip dividend REIT (4-5%). Amazingly, Keppe REIT's distributable income and distribution per unit for 1H 2020 is seemingly unaffected by the COVID-19 pandemic. Their distributable income available to shareholders for 1H 2020 is $94.8 million ($94.6 million in 1H 2019) and their distribution per unit for 1H 2020 is 2.80 cents (2.78 cents in 1H 2019). While most Singapore REITs distributable income and distribution per unit were severely affected by the COVID-19 pandemic, Keppel REIT's performance remains resilient and unaffected. This reflects Keppel REIT's excellent management and highly sustainable dividends, further enhancing its status as one of Singapore's highest quality REITs. Keppel REIT's proven dividend history and high-quality dividends are one of the reasons why it is highly popular among dividend investors in Singapore. 



 

2. Well Diversified Tenant Portfolio and High Occupancy Rate

Keppel REIT's portfolio consists of premium Grade A commercial properties in Singapore, South Korea, and Australia with a total worth of $7.9 billion as of 30 June 2020. Keppel REIT has a well-diversified tenant base of 340 tenants, many of which are established blue-chip companies. They are not overly reliant on any one property or tenant for a significant portion of their portfolio income. Keppel REIT's top 10 tenants contribute a total of only 34.9% of their gross rent, with the largest tenant (DBS) contributing only 6.6%. Their well-diversified tenant portfolio helps them to remain resilient and even perform in tough economic times such as the current COVID-19 pandemic. Moreover, they have a high overall portfolio occupancy rate of 98.6% (98.7% for Singapore, 98.3% for Australia, 97.7% for South Korea). This allows Keppel REIT to maximize its properties to generate as much income as possible which would translate to higher dividends to shareholders. Keppel REIT has a long overall portfolio weighted average lease expiry of 4.6 years (Singapore: 3.5 years, Australia: 8.5 years, South Korea: 1.9 years) and their top 10 tenants WALE was 6.5 years. Investors can be assured of Keppel REIT's performance in the coming years due to their well-diversified tenant base and high occupancy rate.




3. Excellent Capital Management

Keppel REIT's debt gearing ratio is 36.3% as of 30 June 2020 and it is well within the appropriate levels of <40%. REITs often use debt as leverage for acquisitions or investments to expand their portfolio at a faster rate. It is important for a REIT to not over-leverage or it could face possible cash flow problems in the future if it is unable to repay its debts. Keppel REIT has always been known for its prudent capital management style and its management has managed to stagger its debt payments in the coming years such that no significant amount of debt is due in any one year. Their weighted average term to maturity for their debt payments is 3.6 years and 79% of their borrowings are on a fixed rate. Keppel REIT has approximately $938 million of undrawn credit facilities available, including $369 million of committed facilities to help them pay their debt if needed. Also, Keppel REIT has available capital gains from past divestments to enhance its debt payment stability. Keppel REIT's strong balance sheet with total assets worth $7.4 billion and total liabilities at $2.3 billion reflects its prudent capital management over the years. It is highly unlikely that Keppel REIT would face any significant cash flow problems in the future. This contributes to its popularity among investors as a high-quality resilient commercial REIT.


 

Verdict

In my opinion, Keppel REIT ranks among the top few high-quality REITs in Singapore with a proven track record over the years and highly sustainable dividends. Its brilliant performance in the COVID-19 pandemic further solidifies its reputation as a top tier commercial REIT. Personally, I am considering replacing Frasers Hospitality Trust in my portfolio with Keppel REIT at the end of the year (I feel that hospitality REITs are significantly impacted in the current economic situation and would need at least next year-end to fully recover from the impact of the COVID-19 pandemic). You can definitely consider adding Keppel REIT to your dividend portfolio if you are looking to make it more robust and resilient. 

 

Source: Keppel REIT 1H 2020 Financial Results

 

What do you think of Keppel REIT's performance in 1H 2020?


Comments

Post a Comment

Popular posts from this blog

2020 End Of Year Portfolio Updates and Future Plans

Image
Changes to Portfolio  Recently, I have just divested my shares of CapitaLand in my portfolio. I purchased $2600 worth of CapitaLand shares at $2.9 per share before their ex-dividend date in July and sold them in December at $3.25 per share. I gained about 15% ($400), including both capital gains and dividends, from this trade which I am extremely satisfied with. This has been quite a disappointing year for Singapore REITs but 2020 Q3/Q4 has already to begun to show signs of improvement and here's hoping 2021 would be a much smoother year for everyone.  Future Plans   I have around $40k in REITs which I would not touch and just receive dividends passively for next year. On the other hand, I currently have 9,500 shares of Mapletree Industrial Trust at $2.99 per share which I am looking to sell off at around $3.25-$3.3. This would give me a return of around 8.6% - 10.3%. Also, I have another 500 shares of Ascendas REIT at $3.03 per share that I am looking to sell off at $3.3 as well.
Read more

4 Reasons Why Mapletree NAC Trust Is A Good Buy

Image
Mapletree North Asia Commercial Trust is one of Singapore's largest diversified REITs which owns properties for commercial and retail purposes. It is a relatively new REIT that was only listed on the Singapore market in 2013 but has grown rapidly to become one of the largest REITs in Singapore with properties in China, Hong Kong, and Japan. It has been a rough year for Mapletree NAC Trust with the Hong Kong protests causing the closure of their Festival Walk mall in Hong Kong and the subsequent COVID-19 pandemic in China which decreased traffic in their properties significantly. This has caused their share price to fall by more than 20% to the current share price of $0.94. Despite these recent challenges, I still feel that Mapletree NAC Trust is a good REIT to add to your portfolio in the long run. Here are my 4 reasons why Mapletree NAC Trust is a good buy.  Attractive Dividends Mapletree NAC Trust has a 7-year consistent dividend history since 2013. They have been paying out divi
Read more

Top 3 REITs On Huge Discounts Right Now

Image
Singapore's stock market for blue-chip stocks such as banks and REITs have almost returned to all-time lows in March recently. This fall in share price can be attributed to two things mainly: the poor performance of the US market recently due to the presidential election creating uncertainty among investors and the increase in COVID-19 (Secon/Third-wave) cases in Europe and the United States. As a result, many blue-chip REITs and banks in Singapore's stock market share prices have plummeted as well due to the general negative market sentiment. However, nothing fundamentally significant has changed with these stocks. This means that these blue-chip REITs business models are still extremely stable and relatively low risk. This creates many opportunities for investors to acquire these blue-chip REITs at a massive discount at their current prices. Here are my top 3 REITs that are on huge discounts currently.  1. CapitaMall Trust (Blue-Chip) CapitaMall Trust is currently trading at
Read more