Keppel DC REIT Reports Strong 10.3% Revenue Growth in FY 2024, Expands Portfolio with Strategic Acquisitions

Keppel DC REIT Reports >100% Net Profit Growth in FY 2024

Overview Summary

Keppel DC REIT, a Singapore-based data centre-focused real estate investment trust (REIT), reported a robust financial performance for the fiscal year ended 31 December 2024. The REIT experienced over 100% growth in net profit, largely driven by strategic acquisitions, increased rental income, and strong demand for data centre facilities. The total portfolio size increased to approximately \$5.0 billion, with 25 data centres strategically located across Asia-Pacific and Europe.

Key Points with Supporting Evidence

1. Revenue Growth

Gross revenue grew by 10.3% to \$310.3 million in FY 2024 compared to \$281.2 million in FY 2023. This was largely attributed to acquisitions and rental escalations. The report states, “Gross rental income for FY 2024 was \$305.7 million, an increase of \$28.7 million or 10.4% from FY 2023 of \$277.0 million” [[27]].

2. Net Profit Surge

Net profit after tax surged by >100% to \$313.9 million in FY 2024, up from \$122.2 million in FY 2023. This large increase was driven by fair value gains in investment properties and higher contributions from acquisitions [[4]].

3. Strategic Acquisitions

Keppel DC REIT completed significant acquisitions, including Tokyo DC 1 and Keppel DC Singapore 7 and 8. These acquisitions contributed to the REIT’s revenue and profitability. The report highlights, “On 31 July 2024, Keppel DC REIT completed the acquisition of Tokyo Data Centre 1 for JPY 23.4 billion (S\$201.0 million)” [[3]].

4. Dividend Payout

The REIT declared a total distribution of 4.902 cents per unit for 2H 2024, with a distribution yield of 4.34% based on the closing unit price of \$2.18 as of 31 December 2024 [[2]].

5. Risk Factors

Risks include higher property expenses due to increased loss allowances for doubtful receivables in Guangdong data centres and higher finance costs. Property operating expenses rose by 37.9% to \$50.0 million in FY 2024 [[27]].

Analysis of the Key Points

Strengths

Revenue & Profitability: Strong growth in gross revenue and net profit underscores effective portfolio management and strategic acquisitions.
Geographic Diversification: A diversified portfolio across Asia-Pacific and Europe reduces location-specific risks.
Dividend Yield: A stable distribution yield of 4.34% makes Keppel DC REIT attractive to income-focused investors.

Risks

Rising Costs: Higher operating and finance costs could impact future profitability.
Currency Risks: Exposure to foreign currency fluctuations due to international investments [[28]].
Economic Uncertainty: Potential macroeconomic headwinds could affect tenant demand and rental escalations [[28]].

Questions for Further Research

How does Keppel DC REIT’s dividend yield compare to industry peers?
What are the long-term prospects for data centre demand in key markets like Singapore and Japan?
What measures are in place to mitigate rising property expenses?

Recommendation

For Current Investors

Hold the stock. Keppel DC REIT offers a stable dividend yield and has demonstrated strong growth in net profit and revenue. However, monitor rising costs and potential risks closely.

For Potential Investors

Buy the stock. The REIT’s robust performance, strategic acquisitions, and growing demand for data centres present a compelling investment opportunity. However, consider the risks of rising expenses and currency fluctuations.

Disclaimer: This recommendation is based on the financial report for FY 2024 and does not constitute financial advice. Investors should conduct their own research or consult a financial advisor before making investment decisions.

Business Description

Keppel DC REIT focuses on a diversified portfolio of income-producing data centre assets primarily in Asia-Pacific and Europe. It operates 25 data centres valued at approximately \$5.0 billion. Key markets include Singapore, Australia, China, Japan, and Europe. Its customer base comprises cloud service providers, enterprises, and financial institutions, making it a key player in the growing digital economy. The REIT’s competitive advantage lies in its strategic acquisitions and proactive asset management.

Key Financial Statement Analysis

Income Statement

Gross Revenue: Increased by 10.3% in FY 2024 to \$310.3 million.
Net Profit: Surged by >100% to \$313.9 million, driven by fair value gains and acquisitions [[4]].

Balance Sheet

Total Assets: Increased by 38.4% to \$5.54 billion, reflecting new acquisitions [[8]].
Net Asset Value: \$1.53 per unit, a 14.2% increase from FY 2023 [[9]].

Cash Flow Statement

Operating Activities: Generated \$223.7 million in cash, up \$12.9 million from FY 2023 [[16]].
Investing Activities: Net cash used was \$1.07 billion, primarily for acquisitions [[16]].
Financing Activities: Raised \$1.00 billion from unit issuances [[16]].

Conclusion

Keppel DC REIT’s strong financial performance, strategic acquisitions, and growing demand for data centres make it an attractive investment. However, investors should weigh the risks of rising costs and economic uncertainties. Current investors are advised to hold, while potential investors should consider buying into this REIT for long-term value.