K-REIT – Nomura

First look

KREIT’s core operating performance in 2Q09F was better than we expected as management continued to roll over leases at higher rents. However, with further deterioration in portfolio occupancy, we believe focus will shift towards trading rental growth for occupancy, and we expect full-year rental income growth to move in line with our forecast. Trading at an implied EV of S$994psf, we believe downside risk in KREIT’s portfolio valuation is more than priced in.

Focus shift towards occupancy