Keppel Pacific Oak US REIT

(Sept 11: $1.03)

MAINTAIN BUY. Keppel-KBS US REIT announced a change of name to Keppel Pacific Oak US REIT (KORE), with plans underway to enter into a new outsourcing management agreement with a new US asset manager, Pacific Oak Capital Advisors. The new outsourcing management agreement will be substantially on the same terms as the existing one. Despite concerns over the rising US-China trade tensions, we believe KORE’s office portfolio, which mainly focuses on US technology hubs, will stay resilient and continue to outperform the broader market. The changes announced in name and trust structure are more cosmetic in nature, and should not have any operational impact. Management has guided for potential acquisitions of about US$100 million ($138 million) later this year, depending on market conditions. Valuations are attractive at 0.9x P/BV and 8.3% yield — healthy at more than 300bps spread compared with Singapore office REITs. Price target of 88 US cents, 19% upside plus about 8% yield. —