MENU

3 Things Keppel DC REIT’s Management Wants You To Know About Its Business

In mid-April, Keppel DC REIT (SGX: AJBU) released its 2018 first quarter earnings update. As a quick introduction, the REIT owns data centres and currently has a portfolio of 14 such properties in Asia and Europe.

The Manager of Keppel DC REIT had given a presentation on the REIT’s latest results. In the presentation deck, I saw three slides on the REIT’s business that I think investors should pay attention to.

The first slide shows a high-level summary of Keppel DC REIT’s income statement for 2018’s first quarter:


Source: Keppel DC REIT 2018 first quarter earnings presentation

We can see that the REIT had enjoyed a mixed quarter with strong double-digit growth in gross revenue and net property income, but a decline in DPU.

The REIT attributed its growth in net property income to contributions from Keppel DC Dublin 2, higher variable income from Keppel DC Singapore 1, lower non-cash adjustment for straight-lining of rental income at Gore Hill DC, and lower property-related expenses at Keppel DC Singapore 3. These were partially offset by lower rental income from Basis Bay Data Centre and Gore Hill Data Centre, as well as higher property-related expenses at Keppel DC Dublin 2.

DPU came in 4.8% lower year-on-year mainly due to a one-off capital distribution in 2017’s first quarter. Excluding the capital distribution, the REIT’s adjusted DPU was up by 3.4% year-on-year.

The next slide I want to look at shows a breakdown of Keppel DC REIT’s asset value by geography:


Source: Keppel DC REIT 2018 first quarter earnings presentation

We can observe that the REIT’s assets are located in three main geographical regions: South East Asia; Europe; and Australia. 42.5% of Keppel DC REIT’s assets under management (AUM) are located in South East Asia. Europe comes in second at 39.9%, while Australia has a 17.6% cut. Having its assets distributed across three big regions reduces Keppel DC REIT’s concentration risk.

The last slide I want to talk about shows the REIT’s lease expiry profile:

 
Source: Keppel DC REIT 2018 first quarter earnings presentation

The lease expiry profile is an important thing to study for a REIT as it gives us clues on how stable the REIT’s rental income may be.

There are three positive traits I would like to point out with Keppel DC REIT’s lease expiry profile:

1. The REIT’s weighted average lease to expiry for its portfolio was 9.6 years (by weighted average leased area) as of 31 March 2018. That’s long.

2. Less than 8% of the REIT’s leases will expire in the next three years.

3. More than 70% of the REIT’s leases will expire only after 2023.

In all, the REIT should have good visibility on its rental income for the next few years.

How We Made an 88% Return in Just 19 Months!

Members of David Kuo’s personal investing club Stock Advisor Gold were recently rewarded with the biggest winner Motley Fool Singapore has seen to date In a special, 100% FREE report we’ve put together, we take you behind the scenes to show you exactly how we first uncovered this stock… every article and piece of research we released on it… and what ultimately led to our decision to SELL for an 88% gain. Click here to claim your copy now!

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