Date of Report
21 October 2024
Broker
UOB Kay Hian
Company Description
Keppel DC REIT invests in a diversified portfolio of income-producing real estate assets primarily for data centre purposes. It was listed on the SGX on 12 December 2014 as the first pure-play data centre REIT in Asia.
Stock Data
- Share Price: S$2.25
- Target Price: S$2.50
- Upside: 11.1% (Previous TP: S$2.28)
- Market Cap: S$3,881.9 million
- 3-Month Average Daily Turnover: US$9.3 million
- 52-Week High/Low: S$2.28/S$1.60
3Q24 Results
- Gross Revenue: S$76.9 million (+8.9% YoY)
- Net Property Income (NPI): S$64.5 million (-0.2% YoY, impacted by provisions of S$5.3 million for Guangdong data centres)
- Distributable Income: S$44.7 million (+1.9% YoY)
- DPU (Distribution Per Unit): 2.501 S cents (+0.4% YoY)
Key Financials
- FY24 NAV/Share: S$1.37
- FY24 Net Debt/Share: S$0.85
- Major Shareholders:
Performance Highlights
- Positive Rental Reversion: Achieved over 40% positive reversion for a major colocation contract in Singapore in 3Q24, reflecting strong demand and tight vacancy.
- Portfolio Occupancy: Stable at 97.6% in 3Q24.
- DPU Performance: Reported DPU of 2.501 S cents for 3Q24, which was slightly above expectations.
- Upcoming Leases: Several large colocation leases are expiring in 4Q24 and 2025, providing opportunities for higher market rents.
Strategic Focus
- Capital Recycling: Successfully divested the Intellicentre Campus in Sydney for A$174.0 million and reinvested part of the proceeds into higher-yielding data centre investments.
- Expansion into Japan: Completed the acquisition of a 98.47% interest in a freehold data centre in West Tokyo for ¥23.4 billion, leased to a Fortune Global 500 hyperscaler.
Market Outlook
- High-Value Colocation Leases: KDCREIT is positioned as a key beneficiary of rising data centre rents in Singapore.
- Sustainable Demand: Continued demand for colocation space is expected due to structural trends such as generative AI.
- Acquisition Opportunities: Management is scouting for data centre acquisitions in Singapore, South Korea, and Japan.
Financial Projections
- Net Turnover Forecasts:
- 2023: S$277 million
- 2024F: S$305 million
- 2025F: S$313 million
Investment Recommendation
- Rating: Maintain BUY
- Target Price: S$2.50 based on DDM (Cost of Equity: 6.75%, Terminal Growth: 2.5%)
