A solid set of results – 1H22 DPU grew 1% y-o-y, in line, with contributions from newly acquired asset Keppel Bay Tower (May’21) partially offset by the divestment of 275 George St (Jul’21).
Key positives: i) Occupancy could hit 97% including leases in advanced negotiations / documentation; vacancies largely backfilled, ii) Strong positive rental reversions with Singapore assets especially recording double digit reversions, iii) management expects strong rental growth momentum to continue.
Key negatives: i) interest rates continue to rise but still at very low rates with 73% hedged, ii) leasing momentum slowed in Australia.
Maintain BUY; TP of S$1.40. Singapore office market continues on upward trend and KREIT, the only pure-office proxy, is poised to benefit. Valuation remains attractive at c.5.5% FY22F yield and 0.8x P/NAV
