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Keppel DC REIT FY 2018 Earnings: Steady Growth With A Resilient Portfolio

Keppel DC REIT (“Keppel DCR”) (SGX: AJBU) released its full-year 2018 earnings yesterday on 22 January 2019. The REIT has Keppel Corporation Limited (SGX: BN4) as a sponsor, and owns 15 properties across eight countries with AUM at S$2 billion as at December 31, 2018.

Here are the 10 key points from its earnings release and presentation slides:-

1. Gross revenue for 2018 fourth-quarter rose by 30.5% to S$48 million, up from S$36.8 million a year ago. Growth came from acquisitions in Singapore, Australia, Germany and Ireland. Property expenses rose at a slightly higher clip of 33.4%, resulting in net property income (“NPI”) rising by 30.1% to S$42.5 million.

2. Distribution income and distribution per unit (“DPU”) for the reporting quarter rose by 29% and 5.7% respectively to S$26.1 million and $0.0185. The difference in growth rates is due to the enlarged share capital base from the issuance of new units to fund Keppel DCR’s acquisitions during 2018.

3. For the full year 2018, total adjusted DPU rose by 5% year on year from $0.0697 to $0.0732, giving Keppel DCR a distribution yield of 5.1% based on its closing price of S$1.44 on 22 January 2019.

4. The REIT is developing a new data centre in Sydney, Australia known as IC3 East DC. The centre will be built on the vacant land within the REIT’s existing Intellicentre 2 Data Centre site, and completion is expected in 2019 and 2020. This asset will be leased to Macquarie Telecom on a 20-year triple-net master lease basis, which will enhance the REIT’s income stability.

5. In addition to the above, the REIT also entered into an agreement to acquire the remaining 999-year leasehold land interest in Keppel DC Dublin 1 in 2018. The deal is expected to be completed by the first-half of 2020.

6. The breakdown of the REIT’s assets by country is as follows:-

Source: Keppel DC REIT FY 2018 Presentation Slides

7. The portfolio has a long weighted-average lease expiry (“WALE”) period of 8.3 years with occupancy rates at 93.1%. Less than 5% of the leases are expiring until end-2020, thereby giving good income visibility for the REIT’s portfolio for the next two years.

8. Aggregate leverage (i.e. borrowings) for the REIT has declined from 32.1% to 30.8%, leaving room for the REIT to borrow more to fund potential future acquisitions.

9. The average cost of debt is low at 1.9% per annum with an average debt tenor of three years. Interest coverage is at 11.4 times which means the operating profit of the REIT is able to service the finance costs for 11 years.

10. In terms of growth prospects for the REIT, according to a report by BroadGroup Consulting, the global cloud infrastructure market is expected to grow by 25% CAGR in 2019-2023, while the global co-location market is expected to grow by 15% to 17% in 2019. These trends will underpin demand for data centres and drive Keppel DCR’s business moving forward.

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Keppel DC REIT.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.