K-REIT - Macquarie raises K-REIT Asia target to $1.68 vs $1.38

Stock Name: K-REIT
Company Name: K-REIT ASIA
Research House: MacQuarie

Macquarie raises K-REIT Asia (K71U.SG) target price to $1.68 from $1.38, keeps at Outperform, says Dow Jones. 



Says asset swap with parent Keppel Land (K17.SG) increases K-REIT's exposure to prime-grade Singapore office sector, “which we believe will outperform the other property sectors over the next 2-3 years.” 

Raises FY11-13 DPU estimates by 10%-11%, including contribution from Marina Bay Finance Centre Phase 1, incorporating divestment of Keppel, GE Towers.

Notes, implied capital value of MBFC 1 at S$2,400psf “fair compared to current market transactions; implying office rents in the range of $10.50psf based on a cap rate of 4.25%.” 

Adds, additional borrowings of $820.9 million to partly fund deal, secured at 3.05%, substantially lower than average interest cost of 3.54% at June 30, 2010; post asset swap gearing of 39.1% “still comfortable.” 

Shares down 2.2% at $1.34.