Broker Name: CGS International
Date of Report: April 17, 2025
Keppel DC REIT: Business as Usual – A Comprehensive Analysis
1Q25 Performance Overview
- Keppel DC REIT (KDCREIT) reported a 1Q25 DPU of 2.503 Singapore cents, aligning with 25.2% of the FY25F forecast [[1]].
- The REIT achieved rental reversions of +7% in 1Q25, with a high portfolio occupancy rate of 96.5% [[1]].
- CGS International maintains an Add rating with an unchanged DDM-based TP of S\$2.48 [[1]].
Financial Highlights
- Revenue increased by 22.6% year-over-year to S\$102.2m in 1Q25 [[1]].
- Net Property Income (NPI) rose by 24.1% year-over-year to S\$88.1m, driven by contributions from SGP DC7 and SGP DC8, Tokyo DC1, and positive rental reversions [[1]].
- These gains were partially offset by the sale of Intellicentre Campus and a one-off settlement sum related to a tenant dispute at SGP1 received in 2024 [[1]].
- Distributable income grew significantly by 59.4% year-over-year to S\$61.8m in 1Q25, translating to a DPU of 2.503 Singapore cents, a 14.2% year-over-year increase [[1]].
Rental Reversion and Portfolio Occupancy
- KDCREIT experienced a +7% rental reversion in 1Q25 [[1]].
- Portfolio occupancy remained strong at 96.5% at the end of 1Q25 [[1]].
- While there were no major contract renewals in 1Q25, the REIT renewed 1.8% of its portfolio leases, primarily in Singapore and Dublin, achieving the +7% rental reversion [[1]].
- Approximately 13.6% of leases are set to expire for the remainder of FY25F, with an additional 8.2% expiring in FY26F [[1]].
- Management indicated that the bulk of FY25F renewals are scheduled for re-contracting in 2Q25F, mainly from Singapore properties [[1]].
- Given low market vacancy rates and a robust rental market in Singapore, KDCREIT is expected to continue delivering strong rental reversions upon the renewal of its FY25F leases [[1]].
Inorganic Growth Prospects
- KDCREIT’s gearing stood at 30.2% at the end of 1Q25 [[2]].
- The average debt cost remained stable quarter-over-quarter at 3.1% in 1Q25, with management expecting funding costs to remain in the low 3% range for FY25F [[2]].
- With a robust balance sheet, KDCREIT is well-positioned to pursue growth opportunities through new acquisitions, including in Japan and South Korea, and value creation through potential asset enhancement initiatives [[2]].
- SGP DC1 in Singapore, with a low occupancy rate of 72.2% and a remaining weighted average lease expiry of 1.1 years as of 1Q25, may offer potential value creation opportunities [[3]].
Investment Recommendation
- CGS International reiterates an Add rating for KDCREIT, maintaining an unchanged DDM-based TP of S\$2.48 [[3]].
- Potential re-rating catalysts include accretive acquisitions and earnings upside from greater tax transparency on earnings for SGP DC7 and SGP DC8 [[3]].
- The possibility of adding another 1.5 floors of data center hall space at SGP DC8 also presents an upside [[3]].
- Additional catalysts include the collection of arrears from Bluesea and higher-than-forecast rental reversions [[3]].
- Downside risks include lower-than-forecast portfolio occupancy affecting topline and lower-than-expected rental reversions due to a slower macro outlook [[3]].
Key Figures and Ratios
Financial Summary
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Gross Property Revenue (S\$m) |
281.2 |
310.3 |
367.9 |
389.7 |
402.4 |
| Net Property Income (S\$m) |
245.0 |
260.3 |
324.8 |
344.2 |
355.9 |
| Net Profit (S\$m) |
126.8 |
300.7 |
205.5 |
221.6 |
230.5 |
| Distributable Profit (S\$m) |
167.7 |
172.7 |
220.1 |
228.6 |
237.4 |
| Core EPS (S\$) |
0.07 |
0.17 |
0.09 |
0.10 |
0.10 |
| Core EPS Growth |
(47%) |
132% |
(46%) |
8% |
4% |
| FD Core P/E (x) |
27.53 |
13.27 |
21.86 |
20.32 |
19.57 |
| DPS (S\$) |
0.09 |
0.09 |
0.10 |
0.10 |
0.11 |
| Dividend Yield |
4.62% |
4.66% |
4.89% |
5.08% |
5.26% |
| Asset Leverage |
37.0% |
30.9% |
29.9% |
29.6% |
29.3% |
| BVPS (S\$) |
1.34 |
1.53 |
1.68 |
1.70 |
1.71 |
| P/BV (x) |
1.51 |
1.33 |
1.21 |
1.19 |
1.19 |
| Recurring ROE |
5.4% |
10.6% |
5.8% |
5.9% |
6.1% |
Peer Comparison
|
Price (LC) as at 17 Apr 25 |
Target Price (LC) (DDM-based) |
Mkt Cap (US \$m) |
Last reported asset leverage |
Last stated NAV |
Price / NAV |
Dividend Yield (%) FY24A |
Dividend Yield (%) FY25F |
Dividend Yield (%) FY26F |
Rec. |
| Hospitality |
|
|
|
|
|
|
|
|
|
|
| CapitaLand Ascott Trust |
0.85 |
1.13 |
\$2,450 |
38.3% |
1.15 |
0.73 |
7.2% |
7.2% |
7.5% |
Add |
| CDL Hospitality Trust |
0.77 |
1.07 |
\$733 |
38.8% |
1.48 |
0.52 |
7.0% |
7.7% |
8.3% |
Add |
| Far East Hospitality Trust |
0.54 |
0.75 |
\$828 |
30.8% |
0.92 |
0.59 |
7.5% |
7.5% |
7.3% |
Add |
| Frasers Hospitality Trust |
0.60 |
NA |
\$773 |
35.0% |
0.64 |
0.93 |
4.1% |
4.4% |
4.8% |
NR |
| Simple Average |
|
|
|
35.7% |
|
0.69 |
6.4% |
6.7% |
7.0% |
|
| Industrial |
|
|
|
|
|
|
|
|
|
|
| AIMS AMP AAREIT |
1.24 |
NA |
\$754 |
33.7% |
1.26 |
0.98 |
7.4% |
7.3% |
7.5% |
NR |
| CapitaLand Ascendas REIT |
2.63 |
3.10 |
\$8,806 |
37.7% |
2.20 |
1.20 |
5.8% |
5.9% |
6.0% |
Add |
| ESR-REIT |
0.21 |
0.36 |
\$1,251 |
42.8% |
0.28 |
0.75 |
10.3% |
10.6% |
11.0% |
Add |
| Frasers Logistics & Commercial Trust |
0.88 |
1.35 |
\$2,519 |
36.2% |
1.13 |
0.78 |
7.7% |
7.6% |
7.8% |
Add |
| Keppel DC REIT |
2.03 |
2.48 |
\$3,484 |
30.2% |
1.53 |
1.33 |
4.7% |
4.9% |
5.1% |
Add |
| Mapletree Industrial Trust |
2.02 |
2.82 |
\$4,382 |
39.8% |
1.74 |
1.16 |
6.6% |
6.9% |
7.0% |
Add |
| Mapletree Logistics Trust |
1.18 |
1.73 |
\$4,549 |
40.3% |
1.34 |
0.88 |
7.6% |
6.8% |
6.4% |
Add |
| Stoneweg European REIT |
1.42 |
1.92 |
\$904 |
40.2% |
1.33 |
1.07 |
10.1% |
9.5% |
8.7% |
Add |
| Sabana Shariah SSREIT |
0.36 |
NA |
\$291 |
37.4% |
0.50 |
0.71 |
0.0% |
0.0% |
0.0% |
NR |
| Simple Average |
|
|
|
37.6% |
|
0.98 |
6.7% |
6.6% |
6.6% |
|
| Office |
|
|
|
|
|
|
|
|
|
|
| Keppel REIT |
0.82 |
1.09 |
\$2,400 |
41.2% |
1.24 |
0.66 |
6.9% |
7.1% |
7.2% |
Add |
| OUE REIT |
0.28 |
0.32 |
\$1,172 |
39.3% |
0.59 |
0.47 |
7.4% |
6.9% |
7.3% |
Hold |
| Suntec REIT |
1.13 |
1.33 |
\$2,523 |
42.3% |
2.05 |
0.55 |
5.5% |
5.7% |
6.1% |
Hold |
| Simple Average |
|
|
|
40.9% |
|
0.56 |
6.6% |
6.6% |
6.8% |
|
| Retail |
|
|
|
|
|
|
|
|
|
|
| CapitaLand Integrated Commercial Trust |
2.12 |
2.45 |
\$11,798 |
38.5% |
2.09 |
1.01 |
5.1% |
5.2% |
5.6% |
Add |
| Frasers Centrepoint Trust |
2.21 |
2.68 |
\$3,234 |
39.3% |
2.23 |
0.99 |
5.4% |
5.5% |
5.6% |
Add |
| Lendlease Global Commercial REIT |
0.51 |
0.69 |
\$940 |
40.8% |
0.74 |
0.68 |
7.6% |
7.8% |
7.9% |
Add |
| Mapletree Pan Asia Commercial Trust |
1.20 |
1.53 |
\$4,809 |
38.2% |
1.73 |
0.69 |
7.4% |
6.8% |
6.9% |
Add |
| Paragon REIT |
0.98 |
0.98 |
\$2,106 |
35.3% |
0.92 |
1.07 |
6.7% |
5.2% |
5.4% |
Hold |
| Starhill Global REIT |
0.49 |
0.60 |
\$856 |
36.2% |
0.69 |
0.71 |
7.4% |
7.4% |
7.5% |
Add |
| Simple Average |
|
|
|
38.1% |
|
0.86 |
6.6% |
6.3% |
6.5% |
|
| Overseas-centric |
|
|
|
|
|
|
|
|
|
|
| CapitaLand China Trust |
0.65 |
NA |
\$916 |
41.9% |
1.09 |
0.59 |
8.4% |
8.5% |
8.6% |
NR |
| Elite UK REIT |
0.28 |
0.35 |
\$215 |
45.5% |
0.39 |
0.71 |
10.4% |
10.7% |
10.7% |
Add |
| Manulife US REIT |
0.06 |
0.13 |
\$103 |
60.8% |
0.23 |
0.25 |
0.0% |
0.0% |
47.5% |
Add |
| Sasseur REIT |
0.62 |
0.85 |
\$587 |
24.8% |
0.83 |
0.74 |
9.8% |
10.0% |
10.3% |
Add |
| Simple Average |
|
|
|
43.3% |
|
0.57 |
7.2% |
7.3% |
19.3% |
|
| Healthcare |
|
|
|
|
|
|
|
|
|
|
| Parkway Life REIT |
4.18 |
4.91 |
\$2,075 |
34.8% |
2.41 |
1.73 |
3.6% |
3.7% |
4.0% |
Add |
ESG Analysis
LSEG ESG Scores
- KDC REIT received a C+ for its combined ESG score in 2023 from LSEG, with a C+ in Environmental and Social categories and a B- in Governance [[3]].
- It achieved A+ for ESG Controversies [[3]].
- KDC retained its AA in the MSCI ESG Ratings assessment for the second consecutive year in 2023 [[3]].
- Four of KDC’s five colocation assets in Singapore achieved BCA Green Mark Gold (one asset) and Platinum (three assets) ratings [[3]].
- All of KDC’s colocation facilities in Singapore have attained BCA certifications for their energy and water management systems [[3]].
Implications and Trends
- Data centers account for 1-5% of global GHG emissions, with Singapore’s data centers consuming 7% of the nation’s total energy in 2020, leading to a moratorium on new data centers since 2019 [[3]].
- Singapore lifted the moratorium in 2022 and may enforce measures to raise the efficiency of existing data centers, requiring KDC to comply with additional requirements [[3]].
- Monitoring the energy efficiency of KDC REIT’s data centers is crucial [[3]].
- Slower implementation of responsible environmental practices could negatively affect the share price [[3]].
- KDC has set internal targets to improve resource efficiency and reduce environmental impact, with its sponsor, Keppel Telecommunications & Transportation, exploring ways to reduce the carbon footprint of data centers [[3]].
- These initiatives include studies for a near-shore Floating Data Centre Park in Singapore and projects exploring the use of liquefied natural gas and hydrogen to power and cool data centers [[3]].
- The current valuation of KDC REIT does not factor in any premium/discount to its ESG matters [[3]].
ESG Highlights
- KDC REIT is ranked 18th among 26 REITs in Singapore and 57th among 104 companies in Singapore based on LSEG’s score [[3]].
- KDC is committed to reducing its combined Scope 1 and 2 emissions by 50% from the 2019 baseline by 2030 [[3]].
- In 2023, KDC reduced Scope 1 and 2 GHG Emissions by 13.6% compared to the 2019 baseline [[3]].
- KDC aims to introduce renewable energy to at least 50% of its colocation assets by 2030 [[3]].
- As of 2023, 17% of the total electricity consumed at its colocation assets was sourced from renewable sources, such as wind energy used at its Dublin assets [[3]].
Commitment to ESG
- KDC REIT demonstrates its commitment to ESG by preparing its sustainability report according to global reporting initiative standards and attaining ESG certifications like the MSCI ESG ratings [[3]].
- It participates in various associations, including the REIT Association of Singapore (REITAS), Large Industry Energy Network (LIEN), and Principles for Responsible Investment (PRI), and has set internal targets for ESG [[3]].
Sustainability-Linked Loans
- In 2023, KDC entered into two sustainability-linked loans totaling S\$150m [[3]].
- Improved ESG performance is expected to positively impact its operations, financials, and reputation in the long term [[3]].
Financial Metrics and Analysis
P/BV vs. Asset Leverage
- Analysis of P/BV (Price-to-Book Value) against Asset Leverage indicates trends and correlations useful for valuation and risk assessment [[4]].
Dividend Yield vs. Net DPS
- Examination of Dividend Yield against Net DPS (Dividend Per Share) provides insights into income generation relative to stock price [[4]].
Profit & Loss Analysis (S\$m)
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Rental Revenues |
277.0 |
305.7 |
367.9 |
389.7 |
402.4 |
| Other Revenues |
4.2 |
4.6 |
0.0 |
0.0 |
0.0 |
| Gross Property Revenue |
281.2 |
310.3 |
367.9 |
389.7 |
402.4 |
| Total Property Expenses |
(36.3) |
(50.0) |
(43.1) |
(45.5) |
(46.4) |
| Net Property Income |
245.0 |
260.3 |
324.8 |
344.2 |
355.9 |
| Management Fees |
(26.8) |
(27.8) |
(35.6) |
(38.9) |
(40.0) |
| Trustee’s Fees |
(0.5) |
(0.6) |
(0.8) |
(0.8) |
(0.8) |
| Other Operating Expenses |
(34.0) |
145.0 |
(9.7) |
(10.3) |
(10.7) |
| EBITDA |
183.7 |
376.9 |
278.7 |
294.2 |
304.4 |
| EBIT |
183.7 |
376.9 |
278.7 |
294.2 |
304.4 |
| Net Interest Income |
(37.6) |
(36.1) |
(39.3) |
(40.7) |
(41.0) |
| Pre-tax Profit |
146.1 |
340.8 |
243.6 |
253.4 |
263.5 |
| Taxation |
(15.6) |
(26.8) |
(24.4) |
(17.7) |
(18.4) |
| Minority Interests |
(3.7) |
(13.3) |
(13.7) |
(14.1) |
(14.5) |
| Net Profit |
126.8 |
300.7 |
205.5 |
221.6 |
230.5 |
| Distributable Profit |
167.7 |
172.7 |
220.1 |
228.6 |
237.4 |
Cash Flow Analysis (S\$m)
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Pre-tax Profit |
146.1 |
340.8 |
243.6 |
253.4 |
263.5 |
| Depreciation And Non-cash Adj. |
37.6 |
36.1 |
39.3 |
40.7 |
41.0 |
| Change In Working Capital |
(13.9) |
(11.9) |
(195.1) |
0.2 |
0.7 |
| Tax Paid |
(8.9) |
(23.2) |
(24.4) |
(17.7) |
(18.4) |
| Others |
40.1 |
(145.3) |
15.1 |
7.6 |
7.7 |
| Cashflow From Operations |
201.0 |
196.5 |
78.5 |
284.3 |
294.3 |
| Capex |
(26.4) |
(35.4) |
(35.4) |
(35.4) |
(35.4) |
| Net Investments And Sale Of FA |
0.0 |
(1,119.9) |
(350.0) |
0.0 |
0.0 |
| Cash Flow From Investing |
(26.4) |
(1,155.3) |
(385.4) |
(35.4) |
(35.4) |
| Debt Raised/(repaid) |
(10.0) |
216.1 |
376.9 |
46.5 |
34.5 |
| Equity Raised/(Repaid) |
0.0 |
1,001.3 |
0.0 |
0.0 |
0.0 |
| Dividends Paid |
(175.7) |
(153.0) |
(220.1) |
(228.6) |
(237.4) |
| Cash Interest And Others |
(39.6) |
(44.3) |
(24.8) |
(27.6) |
(28.1) |
| Cash Flow From Financing |
(225.2) |
1,020.1 |
132.1 |
(209.7) |
(231.0) |
| Total Cash Generated |
(50.7) |
61.4 |
(174.9) |
39.2 |
27.9 |
| Free Cashflow To Firm |
185.5 |
(943.4) |
(292.4) |
262.0 |
271.8 |
| Free Cashflow To Equity |
128.5 |
(777.8) |
45.2 |
267.8 |
265.3 |
Balance Sheet Analysis (S\$m)
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Investments |
3,656 |
4,904 |
5,289 |
5,325 |
5,360 |
| Intangible Assets |
18 |
17 |
17 |
17 |
17 |
| Other Long-term Assets |
123 |
175 |
175 |
175 |
175 |
| Total Non-current Assets |
3,797 |
5,096 |
5,481 |
5,516 |
5,552 |
| Total Cash And Equivalents |
150 |
317 |
122 |
148 |
163 |
| Trade Debtors |
54 |
106 |
121 |
128 |
132 |
| Other Current Assets |
6 |
25 |
8 |
8 |
8 |
| Total Current Assets |
209 |
448 |
251 |
284 |
303 |
| Trade Creditors |
70 |
287 |
107 |
114 |
119 |
| Short-term Debt |
72 |
87 |
87 |
87 |
87 |
| Other Current Liabilities |
6 |
12 |
12 |
12 |
12 |
| Total Current Liabilities |
149 |
387 |
206 |
214 |
218 |
| Long-term Borrowings |
1,408 |
1,628 |
1,628 |
1,628 |
1,628 |
| Other Long-term Liabilities |
96 |
101 |
101 |
101 |
101 |
| Total Non-current Liabilities |
1,504 |
1,730 |
1,730 |
1,730 |
1,730 |
| Shareholders’ Equity |
2,311 |
3,372 |
3,727 |
3,775 |
3,810 |
| Minority Interests |
43 |
55 |
69 |
83 |
97 |
| Total Equity |
2,354 |
3,427 |
3,796 |
3,857 |
3,907 |
Key Ratios
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Gross Property Revenue Growth |
1.4% |
10.3% |
18.6% |
5.9% |
3.2% |
| NPI Growth |
(3.0%) |
6.3% |
24.8% |
6.0% |
3.4% |
| Net Property Income Margin |
87.1% |
83.9% |
88.3% |
88.3% |
88.5% |
| DPS Growth |
(8.14%) |
0.72% |
5.05% |
3.78% |
3.67% |
| Gross Interest Cover |
3.79 |
7.32 |
5.18 |
5.47 |
5.66 |
| Effective Tax Rate |
10.7% |
7.9% |
10.0% |
7.0% |
7.0% |
| Net Dividend Payout Ratio |
132% |
57% |
107% |
103% |
103% |
| Current Ratio |
1.41 |
1.16 |
1.22 |
1.33 |
1.39 |
| Quick Ratio |
1.41 |
1.16 |
1.22 |
1.33 |
1.39 |
| Cash Ratio |
1.01 |
0.82 |
0.59 |
0.69 |
0.75 |
| Return On Average Assets |
3.13% |
6.30% |
3.65% |
3.84% |
3.96% |
| Occupancy rate (%) |
88.6% |
98.1% |
97.6% |
97.9% |
97.9% |
| Rental rate (S\$ psf) |
8.9 |
7.6 |
9.8 |
10.3 |
10.7 |
