Company Name: K-REIT ASIA
| Research House: CIMB | Price Call: HOLD | Target Price: 1.23 |
CIMB Research downgraded K-REIT Asia, which owns commercial assets, to ‘neutral’ from ‘outperform’, citing limited further upside, but raised its target price to $1.23 from $1.21 to reflect the debt-equity funded acquisition of a Perth office development.
Units in K-REIT were flat at $1.19, and have surged 43.6% since the start of the year, compared to the FTSE ST Real Estate Industrial Trust Index’s 29.6% gains.
K-REIT agreed to buy a 50% stake in a new office tower development in Perth, Australia, for A$165 million ($211 million), which could be accretive but mainly because of funding using cheapSingapore dollar debt, said CIMB.
The brokerage also said it likes the visibility of the long lease with a 3-5% annual rental step-up, but the longlease could result in limited upside for K-REIT in a buoyant Perth office market.
However, CIMB downgraded K-REIT due to limited upside in its share price and as equity fundraising needs are likely to limit any value added from a potential acquisition of Marina Bay Financial Centre office tower in Singapore.
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