Keppel REIT announces DPU of 1.70 cents for 3Q2015

Keppel REIT 3Q2015

Overview

Keppel REIT is an office REIT with 88% of its portfolio is in Singapore and 12% in Australia.

Singapore

  • Bugis Junction Towers
  • Marina Bay Financial Centre
  • One Raffles Quay
  • Ocean Financial Centre

Australia

  • 8 Chifley Square, Sydney
  • 77 King Street Office Tower, Sydney
  • 8 Exhibition Street, Melbourne
  • 275 George Street, Brisbane
  • Office Tower on the Old Treasury Building site, Perth

Results for 3Q2015

  • Recorded a 4.6% and 1.8% year‐on‐year (“y‐o‐y”) growth in distributable income for 3Q 2015 and year‐to‐date 2015 (“YTD 2015”) respectively, as well as sustained levels of distributable income on a quarter‐on‐quarter (“q‐o‐q”) basis
  • Higher distributable income was due mainly to better performance from Ocean Financial Centre, Bugis Junction Towers and 8 Chifley Square in Sydney
  • Distribution per unit (“DPU”) of 1.70 cents for the third quarter 2015 (“3Q 2015”)
  • Increased fixed‐rate loans to over 70%, which will insulate against interest rate fluctuations
  • Average cost of debt remained constant at 2.5% and interest coverage ratio at a healthy 4.4 times
  • Hedged almost 100% of distribution payment from Australia up till the first quarter of 2016 (“1Q 2016”)
  • Continued to maintain low refinancing obligations, with close to 100% of total borrowings not due for repayment till 2017
  • Concluded a total of 82 leases or approximately 1.1 million sf of office space to‐date
  • Of the new office leases secured in 3Q 2015, one‐third were from tenants setting up presence and operations in Singapore, one‐third were from first‐time entrants into Keppel REIT’s portfolio and the remaining one‐third were expansions by existing tenants
  • Notwithstanding the supply of office spaces from both upcoming and existing buildings, the Manager completed 100% of all leases due for review and almost all leases due for renewal in 2015. With this, approximately 70% of total leases are not due for renewal till 2018 and beyond
  • Despite challenging leasing market conditions, the Manager has achieved a positive rent reversion averaging 16% for office leases signed, renewed and reviewed year‐to‐date
  • Overall portfolio occupancy declined slightly q‐o‐q from 99.3% to  98.5%
  • Gained strategic control of the office and retail components at 8 Exhibition Street in Melbourne with the successful acquisition of the three remaining prime street‐fronting retails units
  • Achieved Certificate of Practical Completion for the office tower on the Old Treasury Building site in Perth, and the Government of Western Australia (WA) will commence its 25‐year long lease in the fourth quarter of 2015 (“4Q 2015”)

My Personal Analysis of Challenger Technologies

Challenger Technologies Logo

Challenger Technologies is an IT lifestyle retailer and has 40 stores island-wide. In my teenage days, I have enjoyed shopping at Challenger store at Funan centre for computer games, software and computer accessories.

I have been holding this stock since the year 2011 which has rewarded me with dividends over the years.

Challenger Technologies currently make up only 1% of my portfolio.

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Summary of September 2015 Transactions

Portfolio_201509_Sept

I have shared the percentage allocation of each stock in my portfolio. As you can see, SMRT, ST Engineering and ComfortDelgro are the 3 top holdings in my portfolio. My portfolio is still in the transition phase to an income investor portfolio. If you follow my blog, in August 2015, I have offloaded many stocks from my portfolio. I made a nifty profit and reinvested them into stable dividend yielding stocks like ST Engineering and ParkwayLife Reit.

If you wonder why SMRT is the largest holding in my portfolio, I have to admit it was a serious mistake I made many years ago. I am still sitting on losses from SMRT. SMRT has a estimate 2% dividend yield and it does not satisfy the my criteria of a good dividend stock. I am still waiting for an opportunity (such as Rail Financing Framework) to exit this stock.

This month, the Fed has decided not to raise interest rates. The next milestone the Fed will be deciding to raise interest rates will be in December 2015. The beaten down market did not rally as much as I expected it to be. Neither did it fell much further. I observed uncertainty in the stock market as STI (Straits Times Index) hovers around the 2,900 to 3,000 range.

I remained as an onlooker on the stock market and meanwhile continue to hunt for stable dividend yielding stocks to add to my portfolio. This month, I have purchased the Singapore Savings Bonds as I have some spare cash sitting in my savings account that gives petite interest rates. Singapore Savings Bonds make up 6% of my portfolio.

I have received dividend payments from ST Engineering, Far East HTrust and OUE HTrust. The dividends shall sit in my war chest while I wait for the next opportunity in the stock market.