Brokers’ take

Compiled by Leila Lai

SOILBUILD BUSINESS SPACE REIT I HOLD (CHANGED)

JAN 23 CLOSE: $0.62
TARGET PRICE: $0.62

OCBC Investment Research, Jan 23

Soilbuild Reit's Q4 2018 results were above expectations due to a one-off item.

Q4 2018 distribution per unit (DPU) increased 16.5 per cent quarter-on-quarter and 4.9 per cent year-on-year to 1.451 cents mainly due to $3.25 million in liquidation proceeds received from Technics Offshore Engineering.

On a full-year basis, FY18 DPU fell 7.5 per cent year-on-year to 5.284 cents or 104.5 per cent of our initial full-year forecast.

Without the one-off item, Q4 2018 DPU would have fallen 8.1 per cent quarter-on-quarter and 17.3 per cent year-on-year to 1.144 cents, while FY18 DPU would have fallen 12.9 per cent year-on-year to 4.98 cents or 98.5 per cent of our initial full-year forecast.

Going forward, we believe challenges will continue at West Park BizCentral, which would likely mean more negative rental reversions ahead.

That said, we estimate Solaris has contributed $1.4 million more in net property income (NPI) post-conversion, on a year-on-year basis, and we see this as a positive going forward.

We revisit our thesis of a positive operational outlook for Soilbuild Reit in 2019 and after adjustments, our fair value falls from 66.5 cents to 62 cents.

As at Jan 22's close, Soilbuild Reit is trading at 8.1 per cent FY19F dividend yield.

KEPPEL DC REIT I BUY (MAINTAINED)

JAN 23 CLOSE: $1.47
TARGET PRICE: $1.60

DBS Group Research, Jan 23

Trading at a yield of about 5.5 per cent and low gearing of about 31 per cent, Keppel DC Reit (KDC Reit) remains one of the few Reits in Singapore capable of making accretive acquisitions, supported by low cost of capital.

The Reit is projected to deliver a solid 3 per cent to 5 per cent growth in distributions, with upside from acquisitions.

Our target price of $1.60 is the highest on the street.

Our numbers were raised to account for the recent positive tax transparency status for its stake in KDC SGP 5.

In addition, the stock's conservative gearing of about 31 per cent provides the Reit with ample gearing capacity to fund opportunistic acquisitions.

Q4 2018 results were in line with expectations.

With a sustained portfolio occupancy of about 93.0 per cent and as KDC SGP 5 ramps up operationally, we are likely to see higher revenues in the medium term.

With limited expiries in the coming two financial years, there is high income visibility, a valued trait in the current volatile climate.

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