Stock Upgraded: K-REIT Asia target price raise to 2.45 by DBS Vickers

DBS Vickers Securities says it has raised its 12-month price target for K-REIT Asia to 2.45 sgd per share from 1.48 sgd because it has increased its assumptions of growth in rents for the real estate investment trust (REIT). The brokerage believes K-REIT is undervalued. "Our revaluation of the assets revealed [a] potential revaluation surplus of 147.4 mln sgd, which will raise [its] revised net asset value to 2.42 sgd from 1.82 sgd, the level at which the assets were injected into the REIT," DBS Vickers said in a note to clients. It has revised upwards its estimates of K-REIT's distribution per unit (DPU). "Our forward DPU forecast of 0.083 sgd for 2008 translates into distribution yield of 4.5 pct, in line with initial office asset yields," DBS Vickers said. "Yield spreads are also becoming attractive, with [the] 10-year government bond yield receding by 40 basis points in the last three months, and strong organic growth expected with positive rental reversions," it said. At 12.11 pm, K-REIT was up 0.17 sgd or 9.19 pct at 2.02, with 676,000 shares traded.