- Revenue surged 12.3% in 9M24, driven by higher occupancy and new acquisitions.
- Portfolio occupancy hit 97.6%, reflecting strong demand in key sectors.
- Dividend yield remains attractive at around 6.5%, despite rising interest costs.
Keppel REIT (SGX: K71U) has just shared its earnings report for the first nine months of 2024 (9M24), and there are several important updates that investors should pay attention to. While its distributable income dipped slightly, the company showed strong revenue growth and increasing demand for its office spaces.
For those new to investing, Keppel REIT is a real estate investment trust that allows people to invest in office buildings without having to buy the buildings themselves. Keppel REIT manages a portfolio of premium commercial properties across Singapore, Australia, South Korea and Japan.
Let’s break down what you need to know about Keppel REIT’s performance and why it still presents a solid opportunity for investors.
5 Key Takeaways for Investors:
- Revenue Growth Despite Higher Costs
Keppel REIT’s revenue jumped 12.3% to S$193.7 million in the first nine months of 2024. This was thanks to more of its office space being rented out, especially in places like Singapore and Australia. Revenue is simply the money a company makes from its business activities, and in this case, it shows that Keppel REIT is doing a good job of keeping its properties in high demand.
- Occupancy Rate Improvement
The term “occupancy rate” refers to how much of a company’s properties are being rented out. Keppel REIT’s occupancy rate improved to 97.6%, meaning almost all its office spaces are currently being used by tenants. This is important because the more space rented out, the more money the REIT makes. A high occupancy rate is a good sign of strong demand for its properties.
- Rental Income on the Rise
Keppel REIT saw a 10.2% increase in its “rental reversion,” which means it was able to charge more money for leasing its office spaces this year compared to previous years. On average, it now charges about S$12.93 per square foot for its Singapore leases. This increase in rental income shows the company’s ability to adapt to market demand and generate higher profits.
- Attractive Dividend Yield
Keppel REIT offers a dividend yield of about 6.5%, which remains attractive despite a slight drop in distributable income. A dividend yield is the percentage of your investment that you can expect to receive as dividends—money the company pays back to its investors. For example, if you invest S$1,000, you might receive S$65 in dividends over the course of the year, based on the 6.5% yield.
- Interest Expenses on the Risk
One risk to keep in mind is that Keppel REIT’s interest expenses have increased due to rising borrowing costs. This means the company has to pay more to service its debts. While 68% of its debt is on fixed interest rates (meaning they won’t change), any further increases in rates could still affect its overall profitability.
Why Keppel REIT Could Be a Smart Addition to Your Portfolio
Keppel REIT offers strong revenue growth, high occupancy rates, and a solid 6.5% dividend yield, making it an appealing choice for investors looking to benefit from real estate. However, before jumping in, it is essential to consider whether this investment fits into your overall portfolio strategy. While Keppel REIT provides steady returns, it also carries risks like rising interest costs and potential changes in office space demand due to remote work. Think about your investment goals, risk tolerance, and the balance of your portfolio. Diversifying across different types of assets is important, so evaluate if adding real estate exposure through Keppel REIT complements your existing investments and aligns with your financial objectives.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.
