Keppel DC REIT Review @ 4 November 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): 23

Key Indicators

Performance Highlight

Gross revenue and NPI improved slightly yoy while distributable income and DPU increased yoy by 9% and 4% respectively. The increase is mainly due to higher finance income from the NetCo debt securities and coupon income from Guangdong DC 3 as well as contributions from the acquisitions of Guangdong DC, London Data Centre and Eindhoven Campus.

Acquisition

    

KDC completed the acquisition of Guangdong DC 2 on 12 Aug.

Sensitivity to Interest Rate

For every 1% increase in interest rate, the DPU impact would be 2.1% based on 3Q 2022 DPU.

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• 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: Below median for more than 10%; 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 10%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: 100%
• WADM: Above median for more than 20% 
• Highest debt maturity within 5 years: Above median for more than 20%; Falls in 2027
• 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; $ 6.80 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
• Flat: Distribution on Capital
• Slight Downtrend: Interest Coverage Ratio
• Downtrend: Property Yield

Relative Valuation

• Current 52 Weeks Range: 18%
• P/NAV: Below -1SD for 1y, 3y & 5y
• Dividend Yield: Above +1SD for 1y & 5y; Above +2SD for 3y

Author's Opinion

Favorable	Less Favorable
High Occupancy	Low REIT Sponsor's Shareholding
Long WALE	Low REIT Manager's Shareholding
Well Spread Lease Expiry	Low Directors of REIT Manager's Shareholding
Low Cost of Debt	Concentrated Debt Maturity
100% Unsecured Debt	High Top Tenant & Top 10 Tenants Contributions
Long WADM	Property Yield Downtrend
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

KDC fundamentals remain resilient and performance has improved slightly as compared to the previous quarter due to the acquisition of Guangdong DC 2 which was completed in August. With regards to the concern on rising energy costs, management indicated that more than 90% of electricity costs are passed to colocation clients, while master lease clients contract electricity directly with the power suppliers. 

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.