MENU

Keppel DC REIT: What Are Data Centres Anyway?

Keppel DC REIT (SGX: AJBU) was listed back in December 2014.

At its initial public offering (IPO), units of Keppel DC REIT were offered at S$0.93 apiece. The REIT closed trading at a unit price of S$1.43 on 11 December 2017, providing its early investors a total return of over 75% since its IPO (including dividends). As Foolish investors, we want to look beyond the stock price movement to understand the underlying business.

And for that, we can turn to Keppel DC REIT’s IPO prospectus. The document contains a wealth of information on the REIT’s business and market.

The ins-and-outs of a data centre

When we look at a new stock, whether it is a company or a REIT, one of the first questions that you should ask is simple but yet, important: What does it do?

In layman’s terms, Keppel DC REIT provides real estate facilities to tenants to house their data centres. As the name suggests, data centres are used for the storage, processing, and distribution of large amounts of data. A tenant would typically store its servers, routers, switches, and the like in the area.

Due to the nature of data centres, the facilities needed are different compared to other types of properties. Unlike a retail mall or a commercial office, a data centre requires facilities such as internet connectivity, cooling equipment, fire suppression systems, and backup power systems.

The diagram below provides an overview:


Source: Keppel DC REIT’s IPO prospectus

As of 30 September 2017, Keppel DC REIT had 14 data centres and one more which is under development. The centres are located in Singapore, Australia, Malaysia, and parts of Europe. The REIT’s tenants include IT firms, telcos, financial institutions, and multinational companies.

Stick around as I will delve deeper into Keppel DC REIT’s business in the coming days.

We believe we've identified a dividend dynamo whose financials are strong enough to qualify its dividend as "safe" - and have profiled this stock in a research report that's now available to download completely free of chargeSimply click here to claim your copy today!

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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