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How Did Keppel DC REIT Perform In The Latest Quarter?

Keppel DC REIT (SGX: AJBU) invests primarily in data centres around the world. The need for data centres has been on the rise in recent years due to the proliferation of the Internet and the requirement of data storage on the cloud. Keppel DC REIT, with its portfolio of 15 data centres, could benefit from this rising demand.

With that, let’s take a look at how the REIT performed in its latest reporting quarter, which was for the three months ended 30 June 2018.

Distributable income and distribution per unit grow

Keppel DC REIT delivered a strong set of results for the latest quarter.

Gross revenue, net property income and distribution per unit (DPU) increased 21.5%, 21.4% and 4.6% respectively. The growth was due to higher contribution from maincubes Data Centre, and the assets in Singapore and Dublin.

Source: Keppel DC REIT 2Q 2018 Results Press Release

Healthy financial position

As of 30 June 2018, Keppel DC REIT maintained a low gearing ratio of 31.7%. This is well below the 45% regulatory cap imposed by the Monetary Authority of Singapore.

The REIT has around S$314 million in debt headroom to make additional debt-funded acquisitions. In the first six months of the year, its net asset value per share grew by 4.1% to S$1.01.

Developments during the quarter

On 12 June 2018, the trust acquired a 99% stake in a new data centre in Singapore. The acquisition was mostly funded through a private placement of 224.0 million new units. It is a DPU-accretive acquisition and increased the REIT’s Singapore portfolio to four assets.

As of 30 June 2018, 66.7% of the expanded portfolio is located in the Asia Pacific region, and 33.3% is in Europe. The portfolio weighted average lease expiry stands at a comfortable 8.8 years while occupancy was at 92.0%.

The REIT has three lease types — colocation, fully fitted, and shell & core. This is explained in my earlier article here.

Looking ahead at industry trends and growth catalysts

The industry continues to be boosted by the digitalisation by enterprises and consumers. Large enterprises also continue to outsource to quality data centres as a more efficient deployment of high-redundancy data centre space.

With financial flexibility for more acquisitions, Keppel DC REIT seems to be in a good position to take advantage of any acquisition opportunity.

Valuation and current yield

Currently, units of Keppel DC REIT trade at S$1.38 per piece, giving a price-to-book ratio of 1.36 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 Jeremy Chia doesn't owns shares in any companies mentioned.