KEPPEL DC REIT
AJBU.SI
Keppel DC REIT: Proxy to data centre growth prospects
Pure-play exposure to data centres
Ramping up its inorganic growth
FY16F distribution yield of 7.0%
Pure-play exposure to fast growing industry
- We expect Keppel DC REIT (KDCREIT) to be a key beneficiary of the proliferation of ‘big data’ and cloud computing trends.
- Being the first data centre REIT to be listed in Asia, KDCREIT offers investors a unique pure-play exposure to this fast growing industry, in our view.
Embarking on inorganic growth opportunities
- Although KDCREIT only had its IPO on SGX-ST in Dec last year, management has been proactively sourcing for accretive acquisition opportunities to fuel its growth.
- On 10 Aug this year, KDCREIT completed the acquisition of a data centre, Intellicentre 2, in Australia for a purchase consideration of A$43.3m, which translates into an estimated NPI yield of 7.2%. Thereafter, KDCREIT proposed to acquire its first data centre in Germany for EUR84m.
- Looking ahead, management has guided that it will continue to look for acquisition opportunities from both its right-of-first-refusal (ROFR) assets pipeline, as well as through third-party acquisitions. This would be supported by Keppel DC REIT’s healthy gearing ratio of 30.1%, as at 30 Sep 2015.
BUY with S$1.24 fair value
- We like KDCREIT for its strong positioning within the data centre industry, as well as its long WALE (8.9 years as at 30 Sep 2015) and prudent capital management.
- It has hedged 90% of its total borrowings and hedged 100% of its forecasted foreign-sourced distribution up till 1H17.
- Valuations are also attractive, with the stock trading at FY16F distribution yield of 7.0%.
- Maintain BUY and S$1.24 fair value estimate on KDCREIT.
Wong Teck Ching Andy
OCBC Securities
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http://www.ocbcresearch.com/
2015-12-11
OCBC Securities
SGX Stock
Analyst Report
1.24
Same
1.24
