FY21 Results First Take: Stable while awaiting recovery
- 4Q21 and FY21 DPU +3%y-o-y and 2% y-o-y respectively with contribution from newly acquired assets in 2H21, in line.
- Key positives: i) portfolio occupancy is stable, ii) 1800 West Loop occupancy improved close to 90%, iii) rental reversions remained positive but moderated in 4Q21
- Key negatives: i) some assets continue to see larger decline in occupancy, ii) 6 assets have occupancies at below 90%.
- Maintain BUY; TP US$0.85. Currently trades at 1x P/NAV and c.8.5% FY22F yield
Key operational data | 4Q2021 | 3Q2021 | %q-o-q | 4Q2020 | % y-o-y | FY2021 | FY2020 | % y-o-y |
Revenue | 36.9 | 36.0 | 2.4% | 34.6 | 6.6% | 141.3 | 139.6 | 1.2% |
NPI | 20.4 | 21.7 | -6.0% | 20.6 | -1.0% | 82.7 | 83.0 | -0.4% |
DI | 16.6 | 15.9 | 4.3% | 14.8 | 11.9% | 62.4 | 58.6 | 6.5% |
DPU (est) | 1.60 | 1.58 | 1.3% | 1.56 | 2.6% | 6.34 | 6.23 | 1.8% |
Portfolio occupancies | 91.9% | 91.8% | 0.1 ppt | 92.3% | -0.4 ppt | |||
Rental reversions (cumulative) | 8.3% | 8.3% | 0 ppt | 10.2% | -1.9 ppt | |||
WALE (years) | 3.6 | 3.4 | 0.2 | 3.8 | (0.2) | |||
Gearing (%) | 37.2% | 37.7% | -0.5 ppt | 37.0% | 0.2 ppt | |||
Av cost of debt (%) | 2.8% | 2.8% | 0 ppt | 3.2% | -0.4 ppt | |||
ICR (x) | 5.1 | 5.0 | 0.1 | 4.7 | 0.4 | |||
Leases expiring in FY2022 | 10.3% | 12.3% | -2 ppt | 12.5% | -2.2 ppt | |||
Leases expiring in FY2023 | 17.0% | 17.9% | -0.9 ppt | 17.1% | -0.1 ppt |
FY21 DPU +1.8% y-o-y mainly due to contribution from newly acquired asset, in line
- 4Q21 estimated DPU +2.6% y-o-y to 1.60 UScts (+1.3% q-o-q), mainly due to contribution from newly acquired assets (completed on 20 Aug 2021).
- FY21 DPU +1.8% y-o-y to 6.34 UScts, in line.
- 4Q21 Revenue and NPI +7% y-o-y and -1% y-o-y to US$37m and US$20m respectively. The lower NPI was partially due to non-cash adjustments such as straight-line rent, lease incentives and amortisation of leasing commissions which has no impact on distributable income. Adjusted NPI was estimated to be +3% y-o-y.
- Gearing held stable at 37.2% vs 37.7% in 3Q21. Average cost of debt held stable at 2.8%
- NAV stood stable at S$0.79.
Key Highlights
(+/-) Overall occupancy stable; 1800 West Loop occupancy improved to close to 90% but continue to see large occupancy declines in some assets.
- Portfolio occupancy stood stable at 91.9%.
- While some assets saw recovery in occupancies; such as Westmoor Center (+7.5ppt to 97.6%) and 1800 West Loop (+7.8ppt to 87.7%), there were some larger declines such as Northridge Center (-5.6ppt to 77.9%), Maitland Promenade (-6.1ppt to 88%) and One Twenty Five (-5.9ppt to 90.6%).
- As such there are c.6 properties (c.5 properties as at 3Q21) that have occupancies below 90% though we did see improvement at 1800 West Loop which has been challenging for a long time.
(+) Positive 4Q21 rental reversions but moderated; more renewals were signed in 4Q21
- FY21 rental reversions moderated a little to +6% vs +8.3% in 9M21. We estimate 4Q21 rental reversions could be positive low single digit.
- KORE has successfully signed 250k sqft of leases in 4Q, slightly above leases signed in previous quarters (178k sqft of leases in 3Q, 174k sqft in 2Q21 and 128k sqft in 1Q21). New leases slowed q-o-q to c.90k sqft but we note renewals were the highest since the pandemic at 136k sqft.
- New leasing demand were still mainly from tech, professional services, and medical and healthcare.
(+) Healthy rental collections; minimal impact from rental relief and deferment.
- Rental collections remained very healthy at 99% in FY21 vs 99% in 9M21.
- Rental deferment requests remain low at c.1% of NLA in 4Q21 and FY21.
KORE currently trades at c.1x P/NAV and c.8.5% yield. Maintain BUY; TP of US$0.85.