What ails underperforming Keppel REIT?

A rebound may be on the cards soon.

Keppel REIT has underperformed its office peers CapitaCommercial Trust and Suntec REIT in 2014. But analysts note that this rough patch in KREIT's history may soon be drawing to a close.

According to Maybank Kim Eng, KREIT’s underperformance could be blamed on fund-raising for its acquisition of MBFC Tower 3 in late 2014, for which it issued 357.1 million new shares.

“Now that this overhang is out of the way, we believe its stock will catch up,” noted Maybank Kim Eng.

Apart from this, the market was also wary of the impending expiry of income support for Ocean Financial Centre (OFC), with fears that KREIT’s distributable income would take a hit once the bulk of income support for OFC expires in 1Q15.

“We believe this has been priced in. On top of that, we expect buffers from other properties and its recently acquired MBFC T3. In particular, downside risks to contribution from MBFC is mitigated by a five-year income support of up to SGD49.2m, which translates into average gross rental of SGD10.40 to SGD10.80 psf pm,” stated the report.

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