Keppel REIT’s Q1 2022 In Line; Green Shoots Emerging From the Recovery in Singapore’s Office Market

No-moat Keppel REIT’s first-quarter 2022 results were largely in line with our expectations. Some of the positive takeaways include high tenant retention ratio of 91% on the back of a positive 7.9% rental reversion. As 99% of the leases committed are from Singapore, we see this as a clear signal of a recovery in Singapore’s office market, as highlighted in our previous note. Portfolio operating metrics remain stable with occupancy rates, while its weighted average lease expiry, or WALE, remains long at 6.1 years. We keep our lease up assumptions, with leasing velocity improving in the second half of the year and our expectation that tenant retention ratio moderates back to the 70% to 80% level in the next few quarters. We maintain our SGD 1.38 fair value estimate and think the shares are undervalued currently. We continue to like the trust for its long WALE, high-quality Grade A office assets, and exceptional tenant register.