UOB Kay Hian analyst Jonathan Koh has kept “buy” on Keppel REIT with a higher target price of $1.49 from $1.45 previously.

As the only pure-play office SGX-listed REIT, Koh notes that Keppel REIT is the key beneficiary of the office market recovery.

“Leasing activities have started to pick up since end-2020. Demand remains subdued in 1HFY2021 but should start to recover in 2HFY2021, driven by non-bank financial services companies and Chinese technology companies,” he writes in a March 25 report.

“Displaced tenants from buildings slated for redevelopments, such as AXA Tower and Fuji Xerox Towers, will also be looking for office space. Business sentiment has improved with the rollout of Covid-19 vaccinations.”

On March 24, the Singapore government announced that it will ease movement restrictions from April 5 due to the low spread of Covid-19 infections in the community. The easing of the restrictions will also allow 75% of employees to return to their workplace, higher than the current 50% cap.

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Split team arrangements will also no longer be mandatory.


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In addition, Keppel REIT has enhanced its resiliency by reducing its reliance on banks and financial institutions, while increasing its exposure to sovereign tenants including the State of Victoria at 311 Spencer Street in Melbourne and the Government of Western Australia at 28 Barrack Street in Perth.

The latter move has increased Keppel REIT’s weighted average lease expiry (WALE) to 6.7 years from 4.6 years, driven by an expansion of its Australia WALE after the completion of 311 Spencer Street in Melbourne.

Keppel REIT’s diversification of its asset mix towards the CBD fringe through the acquisition of Pinnacle Office Park at Macquarie Park in Sydney, is another plus. “Post-acquisition of Keppel Bay Tower, exposure to CBD fringe will account from 3.9% to 11% of assets under management (AUM),” says Koh.

Lastly, Keppel REIT has maintained a positive rental reversion for its Singapore portfolio despite the Covid-19 situation.


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“According to CBRE, Singapore’s Grade-A office rent for Core CBD has declined 2.8% q-o-q to $10.40 psf per month in 4QFY2020, which is still comfortably above Keppel REIT’s average expiring rents of $9.76 psf per month in 2021. Management targets positive single-digit rental reversions this year,” he adds.

As at 4.19pm, units in Keppel REIT are trading 3 cents higher or 2.5% up at $1.23.