Keppel DC REIT Review @ 23 April 2023

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, NPI, distributable income and DPU improved yoy mainly due to contributions from Guangdong DC 2, building shell of Guangdong DC 3 and completion of AEIs. Higher finance income mainly comes from income from NetCo bonds and coupon income from Guangdong Data Centre 3. 

Acquisition

The acquisition of the building shell of Guangdong Data Centre 3 was completed in Aug 2022. It is expected to be fully fitted by 3Q 2023.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 20% or more
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median by 10% or more
• Highest Lease Expiry within 5 Years: ± 10% from median; Falls in 2024
• Weighted Average Land Lease Expiry: Below median by 20% or more

Debt Profile

• Gearing Ratio: ± 10% from median
• Cost of Debt: Below median by 10% or more
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 100%
• WADM: Above median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2027
• Interest Coverage Ratio: Above median by 20% or more

Diversification Profile

• Top Geographical Contribution: ± 10% from median
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 10% or more
• Top Tenant Contribution: Above median by 20% or more
• Top 10 Tenants' Contribution: Above median by 20% or more

Key Financial Metrics

• Property Yield: Above median by 20% or more
• Management Fees over Operating Distributable Income: ± 10% from median; $ 6.94 distribution for every dollar paid
• Operating Distributable Income on Capital: Above median by 20% or more
• Operating Distributable income Margin: Above median by 20% or more
• Operating Distribution Proportion: Above median by 5% or more

DPU Breakdown

• TTM DPU Breakdown
• 96.9% from Operation
• 2.9% from Management Fees Paid in Units
• 0.2% from Income Support
• TTM DPU = 94.8% of Distributable Income

Trends

• Uptrend: DPU from Operation, NAV per Unit, Occupancy, Operating Distributable Income on Capital, Operating Distributable Income Margin
• Downtrend: Interest Coverage Ratio, Property Yield

Relative Valuation

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

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	Short Weighted Average Land Lease Expiry
Long WADM	Concentrated Debt Maturity
High Interest Coverage Ratio	High Top Tenant & Top 10 Tenants' Contributions
Low Top Property & Top 5 Properties' Contributions	Interest Coverage Ratio Downtrend
High Property Yield	Property Yield Downtrend
High Operating Distributable Income on Capital
High Operating Distributable Income Margin
High Operating Distribution Proportion
DPU from Operation Uptrend
NAV per Unit Uptrend
Occupancy Uptrend
Operating Distributable Income on Capital Uptrend
Operating Distributable Income Margin Uptrend

KDC continues to deliver a good set of results for 1Q 2023, and its fundamental remains strong. Though, the top tenant contribution has caught my eye for years. As per the IPO prospectus in Sep 2014, the top tenant contributes 25.7%, while the top 10 tenants contribute 88.4%. In the latest business updates, we see that the top tenant contributes 35.5%, while the top 10 tenants contribute 78.7%. Refer below for both extracts:

While I am confident in the KDC management team's abilities, sometimes, unforeseen events can arise at any time. Nonetheless, I believe that KDC would have effective strategies to mitigate it, given its experience and expertise in the field.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.