Keppel REIT just released its Q4 2023 financial results. Keppel REIT is a pure-play office REIT with exposure in Singapore, Australia, South Korea, and Japan. Let us look into Keppel REIT Q4 2023 financial results.
Financial Performance
In the following table, we compare Keppel REIT’s FY2023 with FY2022 performance:
| FY2023 | FY2022 | Change | |
|---|---|---|---|
| Property Income | $233.1m | $219.3m | +6.3% |
| Borrowing Costs | ($67.0m) | ($57.7m) | +16.0% |
| Distributable income from operations | $198.7m | $210.9m | -5.8% |
| DPU | 5.80 cents | 5.92 cents | -2.0% |
With the latest update from Keppel REIT Q4 2023 results, we can see the performance of the REIT’s full fiscal year. Property income rose 6.3% to $233.1m, which is welcome news. Unfortunately, borrowing costs increased significantly by 16% to $67m, offsetting the income. As a result, the full-year DPU declined by 2%, from 5.92 cents in FY2022 to 5.80 cents in FY2023.
There is little surprise in this financial performance. The jump in borrowing costs is expected given the higher interest-rate environment we are currently in. With the market expecting the high-interest rate environment to persist longer throughout 2024, the REIT’s borrowing costs may rise further, putting downward pressure on the DPU.
Debt Profile
Here is the comparison of Keppel REIT Q4 2023 vs. Q3 2023 debt profile:
| Q4 2023 | Q3 2023 | Change | |
|---|---|---|---|
| Aggregate Leverage Ratio | 38.9% | 39.5% | -0.6% |
| Adjusted Interest Coverage Ratio | 3.0x | 2.9x | +0.1x |
| All-in Interest Rate | 2.89% | 2.85% | +0.04% |
| Weighted Average Term to Maturity | 2.4 years | 2.7 years | -0.3 years |
| Borrowings on Fixed Rates | 75% | 76% | -1% |
Generally, Keppel REIT’s debt profile saw a slight improvement in Q4 2023. The aggregate leverage ratio fell to 38.9%, down 0.6% from the previous quarter. The adjusted ICR increased slightly from 2.9x in Q3 2023 to 3.0x in Q4 2023.
On a less positive note, the all-in interest rate rose slightly from 2.85% to 2.89%, and fixed-rate borrowings declined by 1% to 75%.
In summary, we think Keppel REIT’s debt profile improved marginally this quarter. Its overall debt profile remains relatively healthy.
Debt Maturity Profile
The chart below shows the amount of debt due for refinancing for each fiscal year:
Keppel REIT’s debt maturity is well staggered over the next several years. However, about 22% is due for refinancing in FY24/25, and another 21% in FY25/26. If the higher interest rate environment persists through 2024 and 2025, we can expect Keppel REIT’s borrowing costs to rise further as it must refinance at higher rates. If portfolio income growth cannot offset these refinancing costs, we expect downward pressure on the REIT’s DPU.
Portfolio Occupancy
Here is the summary of the portfolio occupancy for Keppel REIT Q4 2023 vs Q3 2023:
| Q4 2023 | Q3 2023 | |
|---|---|---|
| Portfolio Occupancy | 97.1% | 95.9% |
| WALE | 5.5 years | 5.6 years |
The portfolio occupancy jumped to 97.1% in Q4 2023. The REIT also saw a positive rental reversion of 9.9% in 2023. This is excellent news, indicating a strong demand for Keppel REIT’s portfolio properties.
Regarding lease expiry, only about 12.6% is due for renewal in 2024, and 14.9% in 2025. Overall, lease expiry is well distributed over the next several years.
Remarks
Keppel REIT’s Q4 2023 results were mixed, with overall property income rising but offset by a jump in property expenses and borrowing costs. The resulting DPU declined by 2% YoY.
The debt profile improved marginally from the previous quarter, with aggregate leverage declining to 38.9% and adjusted ICR rising to 3.0x. The 38.9% ratio remains well below the regulatory limit of 50%. Overall, we think Keppel REIT’s debt profile is relatively healthy. The REIT’s portfolio occupancy rate also remained strong, indicating a robust demand for its properties.
Keppel REIT has a dividend yield of >6% and a price-to-book ratio of 0.65, which may appeal to some investors willing to take on the risks and exposures associated with this REIT.
For more information about Keppel REIT, please visit our Keppel REIT analysis page and our Keppel REIT dividend page.
You may also check out our Singapore REITs page to analyze other REITs.
If you are interested in investing in Keppel REIT, you need a brokerage account with access to the Singapore Exchange. You may refer to our list of the best online brokerage accounts in Singapore.
Related page: FY2023 Presentation Slide
