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Top Stock Highlights of the Week: Keppel Corporation, Keppel REIT, Manulife US REIT and IHH Healthcare

·4-min read

Once again, we bring you a slew of corporate highlights from several REITs and a blue-chip company.

Keppel Corporation Limited (SGX: BN4)

The blue-chip conglomerate’s offshore and marine (O&M) division has signed a global framework agreement with Orsted (CPH: ORSTED) to undertake future offshore substation (OSS) projects.

The agreement is part of an ongoing initiative to streamline processes for OSS projects and also helps to strengthen the collaboration between the two companies.

Orsted is the world’s biggest offshore wind energy developer.

In line with Keppel’s Vision 2030 goals, its O&M division has been actively growing its footprint across the entire value chain for offshore renewables.

According to a Global Wind Energy Council’s 2021 Offshore Wind Report, offshore wind provides the greatest growth potential of any renewable energy technology and the market is expected to grow by more than seven-fold over the next decade. 

Keppel REIT (SGX: K71U)

Keppel REIT announced a distribution per unit (DPU) accretive acquisition of a freehold Grade A office building under development in North Sydney, Australia.

The property, Blue & William, has a total nettable area (NLA) of 14,133 square metres and is being acquired at an initial net property income (NPI) yield of 4.5%.

The total development consideration amounts to S$322.2 million and will be undertaken by Lendlease Group (ASX: LLC).

Practical completion is anticipated to be in mid-2023 and the project will be funded entirely by loans.

Keppel REIT’s pro-forma fiscal year 2020 (FY2020) DPU will increase by 3% from S$0.0573 to S$0.059 post-acquisition.

This acquisition will help to further diversify the REIT’s portfolio by reducing Singapore’s contribution to total assets under management (AUM).

AUM will increase from S$8.6 billion to S$9 billion after this transaction, of which close to one-fifth will be from Australia, up from 16.4% currently.

The REIT’s proportion of freehold assets will also increase from 30.1% to 32.6% by NLA. Its aggregate leverage will be approximately 39.9% after funding this development.

Manulife US REIT (SGX: BTOU)

It’s been more than two years since Manulife US REIT undertook an acquisition, but it was well worth the wait.

This week, the REIT announced the acquisition of three properties in Portland, Oregon and Phoenix, Arizona worth US$201.6 million.

The total NLA of these properties is around 762,000 square feet.

All three properties enjoyed positive rent reversion in the last 12 months and are expected to record further reversion of 2.3% in the next 12 months.

These acquisitions will bump up the REIT’s exposure to technology and healthcare sectors, traditionally recognised as being more resilient, from 9.5% of gross rental income (GRI) to 12.8%.

28.4% of the portfolio by AUM will be exposed to growth markets, up from 21% currently.

The top 10 tenants in these properties include reputable listed companies such as Voya Services Co (NYSE: VOYA), Smart Embedded Computing (NASDAQ: SGH), and Nike (NYSE: NKE).

Portfolio occupancy will also be lifted from 90.9% to 91.3% post-acquisition, while weighted average lease expiry will inch up to 5.2 years from 5.1 years.

The three assets were acquired 2.3% below their valuation and will provide a pro-forma DPU uplift of 4.4% to US$0.0282 for the REIT’s fiscal 2021 first half (1H2021).

Manulife US REIT has issued 154.08 million new units at an issue price of US$0.649 per unit to fund the acquisitions.

The new units will increase the REIT’s unit base by around 9.7%.

IHH Healthcare Berhad (SGX: Q0F) (KLSE: 5225)

IHH Healthcare, an international healthcare services provider with 80 hospitals in 10 countries, reported a strong set of results for its fiscal 2021 third quarter (3Q2021).

Revenue for the quarter jumped by 26% year on year to RM 4.4 billion, driven by growth across all the countries the group operates in as more patients returned to hospitals for treatment.

Net profit surged by 77% year on year to RM 550 million.

Free cash flow for the healthcare giant improved from RM 1 billion to RM 1.7 billion for the first nine months of this year.

With operations gradually returning to normal, IHH expects revenue from COVID-19 services to decline.

Staff costs will also rise as the return to the group’s non-COVID core business sees higher business volumes.

IHH will continue to pursue growth by looking to expand into new or established clusters, and also diversifying into new revenue streams such as diagnostics and laboratory services.

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Disclaimer: Royston Yang owns shares of Nike.

The post Top Stock Highlights of the Week: Keppel Corporation, Keppel REIT, Manulife US REIT and IHH Healthcare appeared first on The Smart Investor.

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