Keppel Earnings Preview: Consensus Target Price Surge Amid Stock Fluctuations

Keppel Ltd is an investment holding and management company. The company through its subsidiaries, carries out operation in the marine, property, infrastructure and telecommunications and transportation businesses.

Keppel's stock price reached a yearly high at the end of March this year, but then fluctuated and fell until early July. Since July, the stock price has risen slightly by about 1%. The company has fallen by around -4.9% year-to-date, while last year, this investment giant's stock price rose by 67.79%.

Keppel REIT's property income for H1 grew 8.9% YoY to SGD 125.1 million, up from SGD 114.9 million in the same period last year.

DPU for the first half of the year, ending in June, fell 3.4% to SGD 0.028 from SGD 0.029 in the same period last year. Distributable income from operations declined 2.1 per cent year on year to $96.9 million from $89.9 million. This comes as borrowing costs rose 29.8 per cent to $41.3 million from $31.8 million.

Koh Wee Lih, CEO of the management company, emphasized that the REIT's Singapore portfolio performed strongly, with a committed occupancy rate of 98.9% and a YoY NPI growth of 4.1%. Koh also noted that the REIT's Australian portfolio showed improvement, with a committed occupancy rate of 93.6% as of the end of June, up from 91.6% in the previous quarter.

Driven by higher rental income, total revenue for Keppel DC REIT grew 11.9% YoY to SGD 157.2 million. An important lease renewal in Singapore even achieved a positive rental reversion of over 40%. However, property expenses skyrocketed 87.1% YoY to SGD 24.5 million due to the provision of loss allowance for the Guangdong data center occupied by blue-chip tenants of the REIT.

Analysts remain optimistic about the REIT. Citigroup Research and DBS Group Research both maintained their "buy" ratings, with target prices of USD 1.91 and USD 2.20, respectively. Citigroup analyst Brandon Lee stated that the REIT's DPU for H1 2024 was USD 0.0455, down 9.9% YoY but up 5% QoQ, accounting for 50% of its total DPU forecast for FY2024. The H1 2024 DPU of the REIT accounts for 51% of the market's expected full-year DPU.

Keppel Infrastructure Trust (KIT) switched from a profit of SGD 39.4 million in H1 2023 to a loss of SGD 23.9 million in H1 2024. Revenue for the same period decreased by 5.8% YoY from SGD 1.1 billion to SGD 1 billion. The main reasons for the revenue decline were the reduced income from Australian chemical supply company Ixom and lower distribution income from Saudi Aramco Gas Pipeline Company, partially offset by the contribution of Australian public transport operator Ventura, which was acquired on June 3. The decline in Ixom's revenue was mainly due to falling commodity prices and weaker currency exchange rates.

As of June 30, the assets managed by KIT increased by approximately 8% from SGD 8.1 billion on January 2 to SGD 8.8 billion. Additionally, KIT is set to issue SGD 200 million in 4.90% subordinated perpetual securities under its SGD 2 billion multicurrency debt program.

Keppel DC REIT, under the management of Keppel DC REIT Management Pte. Ltd, alongside Keppel Ltd., has announced the strategic acquisition of a Tokyo-based data center for JPY 23.4 billion ($144.8 million). Keppel DC REIT will hold a substantial 98.47% stake in the data center, while Keppel Ltd. will own the remaining 1.53%. The debt-financed acquisition is slated for completion in the third quarter of 2024, marking Keppel DC REIT's foray into the Japanese market.The freehold facility, named Tokyo Data Centre 1, spans a net lettable area of 190,165 square feet and is fully leased to a Fortune Global 500 company and major hyperscaler on a triple-net basis, with a lease term of seven years remaining. CEO Loh Hwee Long emphasizes that this move into one of Asia's largest and most dynamic data center markets solidifies Keppel's position and enhances its portfolio through geographic and income diversification.