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Keppel DC REIT: What is a Data Centre, Again?

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.

What’s a data centre, again?

Yesterday, we took a look at what a data centre looks like. Here’s the diagram again, for reference.

Source: Keppel DC REIT IPO prospectus

Today, let’s dig in deeper to understand the different elements that differentiates a data centre from other types of properties.

For that, we can delve deeper into a market research report prepared by BroadMedia Consulting (BMC), a group that was commissioned by the REIT’s manager for research on its industry. Here’s a general description by BMC:

“Data centres are specialised facilities designed to house mission critical networking and computer equipment including servers, data storage systems, routers, switches and telecommunications equipment.”

A typical data centre should have five key characteristics, according to BMC: cooling equipment, redundant power supplies, fire-suppression systems, high-levels of physical security, and raised flooring.

The functions of each element is summarised in the table below:

Source: Keppel DC REIT IPO prospectus

Data centres users can vary, according to BMC:

“Users of data centres are wide ranging and include organisations such as financial institutions, healthcare companies, government agencies, telecommunications service providers, software companies, global Internet companies and cloud computing enterprises.”

Data centres are typically utilised for mission-critical computing process like supporting financial activities such as trading and payment processes. It is also used for web hosting and a means of distribution of content to end users. The use cases will likely increase in the future.  

Hang on for more on Keppel DC REIT tomorrow.  

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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 writer Chin Hui Leong doesn’t own shares in any companies mentioned.