The latest earnings season has started. Within the next five days, no fewer than 16 real estate investment trusts (REITs) or stapled trusts will be giving quarterly updates. There are two REITs, in particular, that investors should be keeping a close eye on. They are Keppel DC REIT (SGX: AJBU)and CapitaLand Mall Trust (SGX: C38U). The rising need for data centres Can Keppel DC REIT end 2018 as impressively as it started it? In the first nine months of 2018, the trust reported distribution per unit (DPU) growth of 4.8%….
The latest earnings season has started.
Within the next five days, no fewer than 16 real estate investment trusts (REITs) or stapled trusts will be giving quarterly updates.
The rising need for data centres
Can Keppel DC REIT end 2018 as impressively as it started it? In the first nine months of 2018, the trust reported distribution per unit (DPU) growth of 4.8%. More pertinently, DPU growth accelerated to 6.3% in the third quarter of the year.
The data centre industry has benefited from strong sector tailwinds as more firms are choosing to outsource data centres, rather than own them. The growing digital space and cloud adoption have also led to the rising need for data centre space.
With Keppel DC REIT’s portfolio of data centres worldwide, it is well-placed to ride on the coattails of the rising trend. Moreover, management has not been afraid to expand its portfolio through acquisitions and to recycle its assets.
In the coming quarterly results, I am expecting another quarter of revenue and DPU growth. Investors should also keep an eye out for more updates on the development of a data centre in Sydney, which is expected to be completed either in 2019 or 2020. The new development should also be yield-accretive.
Retail sector in Singapore still going strong
While many have touted the downfall of traditional retail due to e-commerce, the reality is that the retail sector in Singapore continues to remain resilient.
CapitaLand Mall Trust’s performance so far this year clearly illustrates this point. In the first nine months of the year, the trust gross revenue and net property income increased by 1.4% and 2.8% respectively.
Impressively, all 10 of its majority-owned operational properties reported a year-on-year increase in net property income during that period.
Source: CapitaLand Mall Trust 2018Q3 Results Presentation
In the third quarter of 2018, the trust also managed to ink higher renewal rates, with rental reversion for the quarter at positive 0.6%.
In the coming earnings update, investors can expect higher revenue and net property income, on the back of improved performances from its existing assets and the first revenue contribution from the purchase of the 70% remaining stake in Westgate on 1 November last year. In addition, investors should look out for updates on the development and tenant uptake at Funan, which I am expecting will be a key contributor to DPU growth in the future.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore contributor Jeremy Chia does not own shares in any company mentioned. The Motley Fool Singapore has a recommendation on CapitaLand Mall Trust.