Keppel DC REIT Review @ 1 August 2022

Basic Profile & Key Statistics

• Main Sector(s): Industrial
• Country(s) with Assets: Singapore, Australia, Ireland, Germany, Netherlands, China, England, Italy & Malaysia
• No. of Properties (exclude development/associate/fund): 21

Key Indicators

Performance Highlight

Gross revenue and NPI are similar yoy however distributable income and DPU increased yoy by 8.2% and 2.5% respectively. The increase is mainly due to higher finance income from the NetCo debt securities and net gains on derivatives but is partially offset by higher finance costs and manager's fees.

Acquisition

On 20 June, KDC announced the acquisition of 2 data centres in Guangdong, China. The acquisition will be funded with a mix of debt, equity and/or existing cash. The acquisition of Guangdong DC 2 is expected to be completed by 2H 2022 while Guangdong DC 3 is expected to be completed by 3Q 2023.

Sensitivity to Interest Rate

For every 1% increase in interest rate, the DPU impact is 1.6%.

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 10%
• REIT manager's shareholding: Below median for more than 20%
• Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 20%
• Highest lease expiry within 5 years: ± 10% from median; Falls in 2024 
• Weighted Average Land Lease Expiry: Below median for more than 10%

Debt Profile

• Gearing ratio: ± 10% from median
• Cost of debt: Below median for more than 20%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: 100%
• WADM: Above median for more than 20% 
• Highest debt maturity within 5 years: Below median for more than 20%; Falls in 2026
• Interest coverage ratio: Above median for more than 20%

Diversification Profile

• Top geographical contribution: ± 10% from median
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: Below median for more than 10%
• Top tenant contribution: Above median for more than 20%
• Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

• Property yield: Above median for more than 20%
• Management fees over distribution: ± 10% from median; $ 7.14 distribution for every dollar paid 
• Distribution on capital: Above median for more than 20%
• Distribution margin: Above median for more than 20%

Trends

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

Relative Valuation

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

Author's Opinion

Favorable	Less Favorable
High Occupancy	Low REIT Sponsor's Shareholding
Long WALE	Low REIT Manager's Shareholding
Low Cost of Debt	Low Directors of REIT Manager's Shareholding
100% Unsecured Debt	High Top Tenant & Top 10 Tenants Contributions
Long WADM
Well Spread Debt Maturity
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
Occupancy Uptrend
Distribution Margin Uptrend

From the above table, KDC fundamentals remain resilient. With the target completion of Guangdong DC 2 acquisition in 2H, the performance is expected to be improved moving forward.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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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.