Keppel DC REIT’s Latest Earnings: DPU Rises 13.2%

Yesterday, Keppel DC REIT (SGX: ABJU) released its 2017 first quarter earnings report.

As a quick background, the real estate investment trust, which held its initial public offering (IPO) in 2014, has 12 data centers spread across seven countries in Asia Pacific and Europe. You can read more about the REIT’s IPO in here. You can also catch the results from the REIT’s last earnings report here.

Financial highlights

The following’s a rundown on some of Keppel DC REIT’s latest financial figures:

1. Gross revenue was $32.2 million in the reporting quarter, a 30.1% increase from the same quarter a year ago.

2. Net property income (NPI) was up 36.1% year-on-year to $28.8 million.

3. Distribution per unit (DPU) for the quarter was 1.89 cents, 13.2% more than the 1.67 cents recorded in the same quarter in 2016.

4. As of 31 March 2017, Keppel DC REIT’s investment properties were valued at around $1.45 billion. The REIT ended its reporting quarter with a net asset value per unit of $0.946, up 4.9% from a year ago.

Foolish investors may want to keep an eye on the REIT’s debt profile. The debt profile provides clues on how the REIT is funded and its sensitivity to the interest rate environment. Keppel DC REIT’s debt profile is shown below:

Keppel DC REIT debt profile q1 2017
Source: Keppel DC REIT’s earnings presentation; interest coverage based on earnings before interest and taxes (EBIT) vs. finance costs

As you can see, the REIT’s aggregate leverage had declined from 29.6% a year ago to 27.9%, despite the debt level increasing. Keppel DC REIT’s average cost of debt and interest cover had also both improved.

Looking at the timetable for the REIT’s debt maturity, the first real test will come in 2018 when around 35% of its outstanding loans will mature. Keppel DC REIT has hedged 83% of its total debt.

On 15 November, Keppel DC REIT issued around 242 million new units and raised almost $280 million. Most of the funds were used to finance the acquisition of a 90% stake in Keppel DC Singapore 3.

Operational highlights

Keppel DC REIT ended the reporting quarter with a portfolio occupancy rate of 95.1%, better compared to its previous sequential quarter (94.4%) and the same quarter a year ago (92.0%).

The REIT’s weighted average lease expiry (WALE) by leased lettable area is currently 9.2 years. Keppel DC REIT’s WALE profile is a composite of a WALE of 3.9 years for co-location leases, 8.5 years for fully-fitted leases, and 12.9 years for shell and core leases.

Keppel DC REIT’s manager summarized the outlook for the REIT in the earnings release with the following comments:

“The global economy is expected to grow modestly in 2017 and 2018, amidst potential market volatility and policy uncertainties, according to the Organisation for Economic Cooperation and Development’s Global Interim Economic Outlook released on 7 March 2017.

Against this backdrop, the increasing demands of the digital economy and data centre outsourcing requirements will continue to underpin growth opportunities in the data centre industry. With a global client base and the Manager’s established track record, Keppel DC REIT is well positioned to tap the potential of the industry.”

Keppel DC REIT’s units last traded yesterday at $1.23 each. This translates to a historical price-to-book ratio of 1.3 and a distribution yield of 5.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.