Analysis – Brokers’ Take – 1 Jul 2017

General:

The online version of this news section is shorter slightly shorter than the print version. With the revamped new freesheet – thenewpaper (tnp), this section has an archive of 136 issues (latest: 7 Jul 2017). This was also compiled by Cai Haoxiang, who I believe works for The Business Times (email: haoxiang@sph.com.sg). The first issue on tnp was “Compiled by Kenneth Lim, The Business Times” – dated 6 Dec 2016.

Their disclaimer [I have put some words in bold type.] – All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Focus/Breakdown (with comments in brackets and in bold/italicised):

Keppel REIT (Buy recommendation) – office space REIT

It ended trading at $1.145 per unit (interesting… 3 decimal digits). The forecasted price was $1.23 (Target Price).

  • The REIT is taking a 50% stake (seller recorded as Australian Post) ‘in a premium office tower’ to be built in Australia at 311 Spencer Street, Melbourne.
  • Favourable view towards medium term (how long is this duration?) a distribution per unit (DPU) uptick owing to 30 year lease and (I infer contractually) inherent rental escalations (But what of the Australian taxes?)
  • Predicted immediate/short term DPU ‘dilution’ (decline in unit prices?) and gearing (leveraging) forecasted to rise to 40% which would result in investor ‘pushback’ (what does this mean?)
  • This is surmounted by “…capital values in Singapore should remain steady on the back of recent market transactions and strong interest from investors looking to buy office buildings in Singapore.” (What does ‘capital values’ mean?)
  • Target Price is dependent on Keppel REIT’s Q2 2017 figures
  • The REIT has a 0.8 price to book ratio which to the “brokers” was “attractive”
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