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Wednesday, October 27, 2021

Keppel DC REIT Review @ 27 October 2021

Basic Profile & Key Statistics

Keppel DC REIT (KDC) is a data centre REIT that owns 19 properties across 9 countries.

Performance Highlight

Gross revenue, NPI, distributable income and DPU have improved YoY mainly due to contribution from Eindhoven Campus (acquired in September) and IC3 Ease DC as well as AEIs.

In 3Q, KDC has divested iseek Data Centre in Australia and acquired Eindhoven Campus in the Netherlands. As for the Guangdong Data Centre in China, it is expected to be completed in 4Q 2021. 

On 14 October, more information was released for the proposed investment in debt securities and preference shares into M1’s network asset. This proposed investment is expected to be DPU accretive and expected to be completed by this year end, subject to relevant regulatory approvals as well as unitholders' approval.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 19.964%
  • REIT manager's shareholding is low at 0.362%
  • Directors of REIT manager's shareholding is low at 0.039%

Lease Profile

  • Occupancy is high at 98.1%
  • WALE is long at 4.9 years
  • Highest lease expiry within 5 years is low at 24% which falls in 2024
  • Weighted average land lease expiry is slightly short at 59.23 years

Debt Profile

  • Gearing ratio is slightly low at 35.1%
  • Cost of debt is low at 1.6%
  • Fixed rate debt % is moderate at 73%
  • All debts are unsecured debt
  • WADM is slightly long at 3.2 years
  • Highest debt maturity within 5 years is moderate at 31.5% which falls in 2025
  • Interest coverage ratio is high at 12.2 times

Diversification Profile

  • Top geographical contribution is slightly high at 60.9% 
  • Top property contribution is low at 12.7% 
  • Top 5 properties contribution is low at 49.8% 
  • Top tenant contribution is high at 38.9% 
  • Top 10 tenants contribution is high at 79.3%
  • Top 3 countries contribution is from Singapore, Australia and Ireland which contribute more than 80% of GRI

Key Financial Metrics

  • Property yield is high at 8.4%
  • Management fees over distribution is moderate at 13.9% in which unitholders receive S$ 7.19 for every dollar paid 
  • Distribution on capital is high at 5.3%
  • Distribution margin is high at 58.8%
  • 3.1% of DPU is from income support

Trends

  • Uptrend - DPU, NAV per Unit, Interest Coverage Ratio, Distribution on Capital
  • Slight Uptrend - Distribution Margin
  • Flat - Property Yield 

Relative Valuation

  • P/NAV - Below -1SD for 1y; Average for 3y; Above average for 5y
  • Dividend Yield - Above +2SD for 1y; Average for 3y & 5y

Author's Opinion

 Favorable Less Favorable
High OccupancyLow REIT Sponsor's Shareholding
Long WALELow REIT Manager's Shareholding
Well Spread Lease ExpiryLow Directors of REIT Manager's Shareholding
Low Cost of DebtHigh Top Tenant & Top 10 Tenants Contributions
100% Unsecured Debt 
High Interest Coverage Ratio 
Low Top Property & Top 5 Properties Contributions 
High Property Yield 
High Distribution on Capital 
High Distribution Margin 
DPU Uptrend 
NAV per Unit Uptrend 
Interest Coverage Ratio Uptrend 
Distribution on Capital Uptrend

From the above, KDC fundamentals and performance remain strong where it continues to deliver DPU growth. With the Guangdong Data Centre acquisition and the investment in M1’s NetCo, KDC upcoming performance is expected to be boosted further. 


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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