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What Investors Should Know About Keppel DC REIT’s Latest Results And Valuation

Keppel DC REIT (SGX: AJBU) is a real estate investment trust that owns data centres. Right now, the REIT has 15 data centres in eight countries across Asia Pacific and Europe.

There are two things about the REIT that investors may want to know about right now: Its latest financial performance and valuation.

Financial performance

Here is a table showing important items from Keppel DC REIT’s income statement for the second quarter of 2018:


Source: Keppel DC REIT 2018 second quarter earnings presentation

We can see that Keppel DC REIT delivered a positive set of results for the quarter. There was strong double-digit year-on-year growth in gross revenue, net property income, and distributable income, which led to a 4.6% increase in DPU (distribution per unit).

Keppel DC REIT attributed its gross revenue growth to: (a) the acquisitions of Keppel DC Singapore 5 on June 2018, maincubes DC on March 2018, and KDC DUB 2 on September 2017; and (b) higher contributions from Keppel DC Singapore 1, Keppel DC Singapore 2, Keppel DC Singapore 3 and Keppel DC Dublin 1. Favourable currency swings also helped burnish the REIT’s results.

As of 30 June 2018, the REIT had a healthy gearing ratio of 31.7%, which is well below the regulatory gearing ceiling of 45%. The REIT also reported an occupancy rate of 92.0%.

One important recent development to know with Keppel DC REIT is that it will be developing a new shell and core data centre within the Macquarie Business Park precinct in Sydney, Australia. The new data centre will feature a minimum of 86,000 sq ft of lettable area upon its completion, which is expected to be between 2019 and 2020. The cost for Keppel DC REIT is estimated to be between A$26 million and A$36 million.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows Keppel DC REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market:


Source: Stock Facts on SGX.com; data as of 6 September 2018

We can see that Keppel DC REIT clearly has a higher valuation than the market-average.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.